- Inspection year
- 2019
- Report date
- 28-Jul-2021
- PCAOB release
- 104-2021-146a
- Audits reviewed
- 7
- Audits w/ Part I.A deficiencies
- 6
- Part I.A deficiency rate
- 86%
- Part I.A deficiencies
- 25
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (25)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | The issuer acquired businesses with contingent equity consideration arrangements. The firm did not identify and appropriately address a departure from GAAP related to the issuer's classification of the contingent consideration as equity rather than liabilities as required by FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30) Unrelated and prior to our review the issuer reevaluated its accounting treatment for the contingent consideration 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. Financial statement audit only | AS 2810.30 | |
| 2 | Revenue and Accounts Receivable | For revenue transactions and accounts receivable selected for substantive testing the firm did not examine the underlying source documents. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 3 | Revenue and Accounts Receivable | The firm did not perform sufficient revenue cutoff procedures because the firm's testing was limited to sales transactions recorded on one date and shipped by one carrier. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 4 | Revenue and Accounts Receivable | The firm did not sufficiently evaluate the reasonableness of the issuer's allowance for doubtful accounts because it did not evaluate (1) the appropriateness of the issuer's method for determining the reserve and (2) whether the recorded reserve was determined in accordance with that method. (AS 2501.07) Financial statement audit only | AS 2501.7 |
Issuer B7 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Long-Lived Assets | Long-lived assets were assessed as having a significant risk. The firm relied on control testing performed by management to assess the operating effectiveness of certain controls over long-lived assets. A member of management who performed the control testing was also the control owner of the controls selected for testing. The firm did not evaluate the objectivity of the member of management who performed the control testing and whether its reliance on management's control testing work was appropriate. (AS 2201.18; AS 2605.10) Both financial statement and ICFR audits | AS 2201.18; AS 2605.10 | |
| 2 | Long-Lived Assets | The firm selected for testing a control related to management's review and approval of purchases of long-lived assets. The firm did not evaluate the specific review procedures the control owner performed to review and approve account codes assigned to purchases. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Long-Lived Assets | The firm selected for testing a control related to management's review and approval of purchases of long-lived assets. The firm did not identify and test any controls that addressed the completeness of the purchase invoices used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Long-Lived Assets | The firm selected for testing a control related to management's quarterly review of a long-lived assets schedule intended to assess whether changes in the long-lived assets balances are reasonable. The firm did not identify and test any controls over the accuracy and completeness of the long-lived assets schedules used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Equity-Related Transactions | The issuer engaged an external service provider to provide transfer agent services and subscription agent services. The firm did not test any of the complementary user controls described in the service auditor's report for the service provider. (AS 2201.B22) Both financial statement and ICFR audits | AS 2201.B22 | |
| 6 | Equity-Related Transactions | The firm selected for testing a control related to management's review of equity and equity activity schedules which were derived from reports provided by the service provider. The firm did not (as discussed above) sufficiently test controls over the accuracy and completeness of the information the issuer used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Equity-Related Transactions | The firm used data and reports from the service provider in its substantive testing of equity but did not test or sufficiently test controls over the completeness of the data and reports. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer C5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer's revenue processes were highly automated with transactions being initiated processed and recorded by multiple information-technology ('IT') systems. The firm used sales payment processing and cash receipt data generated or maintained by the IT systems in its substantive revenue testing. However the firm did not test or in the alternative identify and test any controls over the completeness and accuracy of the data. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 2 | Revenue | For its substantive revenue testing the firm selected transactions from the prepaid deposits and deferred revenue populations as of the end of the year under audit. The firm did not perform any substantive procedures to test transactions for which revenue had been recognized during the year. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 3 | Long-Lived Assets | The firm did not evaluate whether the issuer considered in its impairment analysis certain impairment indicators including recurring operating losses net losses negative cash flows from operations and cumulative net losses since inception of the issuer. (AS 2501.07; AS 2810.03) Financial statement audit only | AS 2501.7; AS 2810.3 | |
| 4 | Inventory | The firm did not (1) obtain an understanding of how the issuer developed its inventory reserve and (2) perform procedures to test the inventory reserve beyond inquiry of management. Further the firm did not evaluate the effects of an impairment charge recorded by the issuer on the valuation of other similar assets in inventory. (AS 2501.07; AS 2810.03) Financial statement audit only | AS 2501.7; AS 2810.3 | |
| 5 | Inventory | Certain inventory representing a significant proportion of current assets was held by an outside custodian. The firm did not perform sufficient procedures to test the existence of this inventory because it limited its procedures to confirming the quantities of this inventory with the custodian. (AS 2510.14) Financial statement audit only | AS 2510.14 |
Issuer D6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | In performing its substantive procedures of the issuer's revenue the firm did not sufficiently evaluate whether (1) the issuer's arrangements with a third party represented a contract with an identifiable customer and (2) the issuer's performance obligations should be evaluated jointly or separately in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers ('ASC 606'). (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Revenue | The firm used certain price and quantity information from outside sources in its substantive testing of revenue but did not perform any procedures to evaluate the relevance and/or reliability of such information. (AS 1105.04 and .06; AS 2502.40) Financial statement audit only | AS 1105.4; AS 1105.6; AS 2502.40 | |
| 3 | Revenue | In its analytical procedures over revenue the firm used data from the issuer to develop its expectations but did not test the accuracy and completeness of the data. (AS 2305.16) Financial statement audit only | AS 2305.16 | |
| 4 | Revenue | In its analytical procedures over revenue the firm did not (1) evaluate the plausibility and predictability of the relationship among the data used in developing the revenue expectations (2) establish thresholds for investigating differences from expectations and (3) perform procedures to evaluate differences identified beyond inquiries of management. (AS 2305.13 .14 .20 and .21) Financial statement audit only | AS 2305.13; AS 2305.14; AS 2305.20; AS 2305.21 | |
| 5 | Revenue | With respect to service agreements with other parties the issuer prepared monthly schedules of its revenue earned from those agreements. The firm did not test the accuracy and completeness of certain data included in such schedules. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 6 | Revenue | With respect to service agreements with other parties the issuer prepared monthly schedules of its revenue earned from those agreements. The firm did not evaluate the inconsistency of certain data between the schedules the service agreements and the financial statement disclosures. (AS 2810.03) Financial statement audit only | AS 2810.3 |
Issuer E2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Intangible Assets | The issuer engaged a specialist to assist in its impairment analysis of its finite-lived intangible assets by determining the fair value of the assets. The firm did not evaluate the reasonableness of the assumptions used by the issuer-engaged specialist in determining the fair value of the assets. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 2 | Intangible Assets | The issuer engaged a specialist to assist in its impairment analysis of its finite-lived intangible assets by determining the fair value of the assets. The firm did not test the cash flow projections the issuer provided to the issuer-engaged specialist. (AS 1210.12) Financial statement audit only | AS 1210.12 |
Issuer F1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not test or in the alternative identify and test any controls over the completeness and accuracy of a management report that the firm used in its substantive testing of revenue. (AS 1105.10) Financial statement audit only | AS 1105.10 |