- Inspection year
- 2019
- Report date
- 06-Jul-2021
- PCAOB release
- 104-2021-134a
- Audits reviewed
- 6
- Audits w/ Part I.A deficiencies
- 5
- Part I.A deficiency rate
- 83%
- Part I.A deficiencies
- 21
- Part I.B deficiencies
- 5
- Report
- View PDF ↗
Deficiencies (21)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm did not test the accuracy and completeness of information used in testing controls over access rights and removals. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 2 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm selected for testing an automated control that was designed to calculate and record revenue. The firm did not obtain an understanding of or test how the control was configured. (AS 2201.34) Both financial statement and ICFR audits | AS 2201.34 | |
| 3 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm did not identify and test controls over (1) the accuracy and completeness of information that was used in the performance of a control to verify standard terms in customer agreements; (2) superuser/administrative access to revenue systems in which various automated IT-dependent manual controls resided; (3) the accuracy and completeness of certain inputs used to recognize revenue; and (4) the determination of the units of accounting and allocation of total contract consideration to each performance obligation for contracts with multiple performance obligations. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm did not perform sufficient procedures to test controls over program changes for certain systems because its procedures were limited to inquiry. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 5 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The issuer used a service organization to support many of the activities of its financial reporting system. The firm did not identify and test any complementary user controls over the use of parameters over passwords. (AS 2201.B22) Both financial statement and ICFR audits | AS 2201.B22 | |
| 6 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm selected for testing an automated control over segregation of duties. The firm however did not directly test the control because its procedures were limited to evaluating whether the functions assigned to employees were consistent with effective segregation of duties. (AS 2201.42 .44 and .B9) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44; AS 2201.B9 | |
| 7 | Revenue and Related Accounts | In the revenue process the firm selected for testing certain information technology general controls ('ITGCs') automated controls and information technology ('IT') dependent manual controls. The following deficiencies were identified: · The firm identified deficiencies related to controls over reviewing user access and complementary user controls. The firm did not evaluate these deficiencies to determine if the deficiencies individually or in combination constituted material weaknesses. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 | |
| 8 | Revenue and Related Accounts | The sample sizes the firm used in certain of its substantive procedures to test revenue and related accounts were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer B3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not evaluate whether the revenue transactions selected for testing were recognized in in accordance with the requirements of FASB ASC Topic 606 Revenue from Contracts with Customers because the firm limited its procedures to evaluating the transactions under FASB ASC Topic 605 Revenue Recognition. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Investments | The firm did not test the fair values of certain investments. (AS 2502.15) Financial statement audit only | AS 2502.15 | |
| 3 | Investments | The issuer did not consider unrealized losses on certain investments to be other-than-temporary due to its ability to hold these investments until the recovery of fair values. The firm did not evaluate the issuer's ability to hold the investments for a period of time sufficient to allow for the anticipated recovery in fair value. (AS 2503.48) Financial statement audit only | AS 2503.48 |
Issuer C3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer's revenue transactions can be initiated by customers through electronic data interchange ('EDI') email or phone call. The issuer used a system to process credit card orders. The firm did not obtain an understanding of (1) how revenue transactions were initiated authorized processed and recorded; (2) how IT systems affected the flow of transactions; and (3) the likely sources of potential misstatements necessary to identify and test controls that would prevent or detect a material misstatement in the financial statements. (AS 2201.30) Both financial statement and ICFR audits | AS 2201.30; AS 2301.8 | |
| 2 | Revenue | The firm did not identify and test the controls over the (1) revenue recognition method; (2) review and approval of the prices; (3) processing of EDI orders; and (4) processing and recording of credit card sales. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Revenue | The firm selected for testing controls related to management's reviews of monthly and quarterly revenue and accounts receivable balances. 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 |
Issuer D3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer had an agreement to market products sold by another party and recognized revenue when the other party sold those products. The firm did not test when the products were sold by the other party. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Revenue | The issuer had an agreement to market products sold by another party and recognized revenue when the other party sold those products. The firm did not evaluate whether revenue was recognized in accordance with FASB ASC Topic 606 including whether the issuer had satisfied its performance obligations under the terms of the agreement. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 3 | Accruals and Other Liabilities | The issuer reversed certain liabilities and recognized a gain on extinguishment. The firm did not evaluate whether the issuer met the criteria under FASB ASC Topic 405 Extinguishment of Liabilities to be considered legally released as the primary obligor of the liabilities either judicially or by the creditor. (AS 2810.30) Financial statement audit only | AS 2810.30 |
Issuer E4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer leased equipment that it then subleased to its customers. The issuer issued common stock to the lessor as payment on the lease with an opportunity for the lessor to earn additional shares of the issuer's stock if revenue milestones were met. The issuer recognized revenue from the sublease agreements net of payments to its lessor. The firm did not test the reduction of revenue related to the payments made by the issuer to the lessor of the equipment. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Revenue | The issuer leased equipment that it then subleased to its customers. The issuer issued common stock to the lessor as payment on the lease with an opportunity for the lessor to earn additional shares of the issuer's stock if revenue milestones were met. The issuer recognized revenue from the sublease agreements net of payments to its lessor. The firm did not test the terms of customer subleases to determine whether the amount and timing of gross billings to customers were appropriate. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 3 | Revenue | The issuer leased equipment that it then subleased to its customers. The issuer issued common stock to the lessor as payment on the lease with an opportunity for the lessor to earn additional shares of the issuer's stock if revenue milestones were met. The issuer recognized revenue from the sublease agreements net of payments to its lessor. The firm did not evaluate the agreements between the issuer and the lessor and the issuer and its customers to determine whether the issuer had an obligation to (1) its customer if the lessor canceled the lease agreement or (2) the lessor if the revenue milestones were met in accordance with FASB ASC Topic 606. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 4 | Revenue | The issuer leased equipment that it then subleased to its customers. The issuer issued common stock to the lessor as payment on the lease with an opportunity for the lessor to earn additional shares of the issuer's stock if revenue milestones were met. The issuer recognized revenue from the sublease agreements net of payments to its lessor. The firm tested a sample of revenue transactions and identified differences. The firm did not (1) evaluate the nature and cause of the differences identified in its sample; (2) project applicable differences to the remaining revenue population; and (3) evaluate if the projected differences were material to the financial statements. (AS 2315.26 and .27; AS 2810.17) Financial statement audit only | AS 2315.26; AS 2315.27; AS 2810.17 |