- Inspection year
- 2019
- Report date
- 25-Jun-2021
- PCAOB release
- 104-2021-123
- Audits reviewed
- 1
- Audits w/ Part I.A deficiencies
- 1
- Part I.A deficiency rate
- 100%
- Part I.A deficiencies
- 12
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (12)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A12 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | For certain subsidiaries the firm did not (1) obtain a sufficient understanding of the likely sources of potential misstatements associated with revenue processes and (2) identify and test controls over revenue recognition. (AS 2201.34 and .39) Both financial statement and ICFR audits | AS 2201.34; AS 2201.39 | |
| 2 | Revenue and Related Accounts | The issuer's main information technology ('IT') system processed revenue transactions and maintained revenue related data. A service organization provided data center hosting services related to the IT system. The firm did not identify and test any relevant complementary user controls described in the service auditor's report. (AS 2201.B22) Both financial statement and ICFR audits | AS 2201.B22 | |
| 3 | Revenue and Related Accounts | The issuer's main information technology ('IT') system processed revenue transactions and maintained revenue related data. A service organization provided data center hosting services related to the IT system. The service organization used several sub-service organizations to host the issuer's IT system and the controls for the sub-service organizations were not addressed in the service auditor's report. The firm did not (1) obtain an understanding of how the use of sub-service organizations affected the issuer's revenue process; and (2) evaluate whether it was necessary to obtain an understanding of or test any relevant controls at the sub-service organizations. (AS 2201.B19 and .B21) Both financial statement and ICFR audits | AS 2201.B19; AS 2201.B21 | |
| 4 | Revenue and Related Accounts | The issuer's main information technology ('IT') system processed revenue transactions and maintained revenue related data. A service organization provided data center hosting services related to the IT system. The service organization used several sub-service organizations to host the issuer's IT system and the controls for the sub-service organizations were not addressed in the service auditor's report. The firm did not evaluate the effect of exceptions identified in the service auditor's report on the issuer's revenue process. (AS 2201.B25) Both financial statement and ICFR audits | AS 2201.B25 | |
| 5 | Revenue and Related Accounts | The firm identified a material weakness related to an employee having responsibilities for financial statement review controls and administrator access to the issuer's IT system discussed above. The firm selected for testing an automated control that restricts the recording of sales to authorized customers. The firm did not evaluate whether its test of one approach for this control was appropriate in light of the identified material weakness. (AS 2201.65) Both financial statement and ICFR audits | AS 2201.65 | |
| 6 | Revenue and Related Accounts | The firm determined that a control over management's assessment of the effect on revenue recognition of FASB ASC Topic 606 Revenue from Contracts with Customers was deficient. The firm concluded that this represented a significant deficiency after identifying and testing two compensating controls. The firm did not sufficiently evaluate the severity of the control deficiency because the firm did not evaluate whether and if so how either of the controls identified as compensating controls addressed the effect of ASC Topic 606 on revenue recognition. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 7 | Revenue and Related Accounts | The firm selected for testing a control over the review of accounts receivable collectability and the allowance for doubtful accounts. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and 44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 8 | Revenue and Related Accounts | The firm did not sufficiently evaluate the reasonableness of the allowance for doubtful accounts because its procedures were limited to testing the subsequent collection of certain accounts receivable without obtaining an understanding of how the issuer developed the allowance and evaluating whether the allowance was reasonable. (AS 2501.09 .10 and .13) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.13 | |
| 9 | Revenue and Related Accounts | The firm did not test the accuracy of the accounts receivable aging report that was used in testing the subsequent collection of certain accounts receivable. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 10 | Equity and Warrants | The issuer completed private placement agreements that provided for the issuance and sale of common stock and warrants. The firm did not identify and assess the risks of material misstatement for relevant assertions related to the private placement transactions and perform procedures to address those risks. (AS 2110.59) Both financial statement and ICFR audits | AS 2110.59 | |
| 11 | Equity and Warrants | The firm did not (1) obtain an understanding of the likely sources of potential misstatements associated with the contractual terms and conditions of the private placement agreements; and (2) identify and test any controls over the evaluation of the presentation and disclosure of these agreements. (AS 2201.34 and .39) Both financial statement and ICFR audits | AS 2201.34; AS 2201.39 | |
| 12 | Equity and Warrants | The firm did not evaluate whether the warrants issued in connection with the private placement transactions included embedded derivatives that should have been presented and disclosed in accordance with FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30 and .31) Unrelated and prior to our review the issuer reevaluated its accounting treatment for the warrants issued in connection with the private placement transactions and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over financial reporting and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised and reissued its report to include an additional material weakness. Both financial statement and ICFR audits | AS 2810.30; AS 2810.31 |