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Grant Thornton LLP
United States · Grant Thornton International Limited · Annually Inspected
- Inspection year
- 2020
- Report date
- 30-Sep-2021
- PCAOB release
- 104-2021-152a
- Audits reviewed
- 29
- Audits w/ Part I.A deficiencies
- 5
- Part I.A deficiency rate
- 17%
- Part I.A deficiencies
- 24
- Part I.B deficiencies
- 2
- Report
- View PDF ↗
Deficiencies (24)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The issuer used an information technology (IT) system to process and record transactions related to revenue accounts receivable and cash. The firm identified control deficiencies in certain IT general controls (ITGCs) over this IT system related to individuals having segregation of duties conflicts that provided these individuals with security administration privileges and the ability to both develop changes and migrate them into production. The following audit deficiencies were identified: · The firm identified and tested a compensating control that it believed would mitigate these ITGC deficiencies. The firm did not identify that this compensating control did not address the risks related to these deficiencies because the control owners performing the compensating control were among the individuals that the firm identified as having the segregation of duties conflicts. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Accounts Receivable | The issuer used an information technology (IT) system to process and record transactions related to revenue accounts receivable and cash. The firm identified control deficiencies in certain IT general controls (ITGCs) over this IT system related to individuals having segregation of duties conflicts that provided these individuals with security administration privileges and the ability to both develop changes and migrate them into production. The following audit deficiencies were identified: · The firm tested certain automated and IT-dependent manual controls over revenue accounts receivable and cash that used data and reports generated or maintained by this IT system. As a result of the audit deficiency discussed above the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 3 | Accounts Receivable | The sample sizes the firm used in certain of its substantive procedures to test revenue and accounts receivable 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 | |
| 4 | Revenue | The issuer recognized certain revenue upon shipment of its products to distributors and estimated an accrual for rebates it had not yet paid based on a rolling average of actual rebates paid in previous months. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the reasonableness of the assumptions the issuer used to estimate this accrual. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Revenue | The issuer recognized certain revenue upon shipment of its products to distributors and estimated an accrual for rebates it had not yet paid based on a rolling average of actual rebates paid in previous months. The following deficiencies were identified: · The firm's approach for substantively testing the rebate accrual was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the rebate accrual because the firm did not test beyond inquiry of management whether the time period that the issuer used to calculate the rolling average was reasonable. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 6 | Revenue | The firm used reports generated or maintained by the IT system discussed above in performing certain of its substantive procedures to test revenue. The firm did not perform any substantive procedures to test or (as a result of the compensating control testing deficiency) sufficiently test controls over the accuracy and completeness of these reports. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer B6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recorded a sales returns reserve based in part on customer data that the issuer obtained from a service organization. Certain relevant controls at this service organization were not operating effectively. The firm identified and tested a control that consisted of the issuer's review of customer data for certain customers that the firm believed would compensate for these ineffective controls. The firm did not evaluate whether the issuer's review was sufficient to address the risk of material misstatement given not all customers were covered by this control. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Revenue | The firm selected for testing a control that consisted of the issuer's review of the calculation of the sales returns reserve. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the adjustments that the issuer made to this reserve. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Revenue | The firm selected for testing a control that consisted of the issuer's review of the calculation of the sales returns reserve. As the compensating control did not address certain customers the firm did not sufficiently test controls over the accuracy and completeness of certain customer data that were used in the operation of this control. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 4 | Revenue | The firm selected for testing a control that consisted of the issuer's review of certain sales incentive reserves. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of certain assumptions the issuer used to determine these reserves. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 5 | Revenue | The firm's approach for substantively testing the sales returns reserve was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of this reserve because the firm did not test beyond inquiry of management the adjustments that the issuer made to this reserve. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 6 | Revenue | The firm did not perform any substantive procedures to test or sufficiently test controls over the accuracy and completeness of certain data that it used in its substantive testing of the sales returns and sales incentive reserves. (AS 1105.10; AS 2501.11) Both financial statement and ICFR audits | AS 1105.10; AS 2501.11 |
Issuer C4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue based on customer contracts that included financing arrangements with the customer. The firm selected for testing a control over this revenue that consisted of the issuer's review of these customer contracts including the review of the credit application supporting the customer's ability and intent to pay. The firm did not evaluate the specific review procedures that the control owners performed to evaluate whether these customer contracts met the collectability criteria required to recognize revenue. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | The firm did not perform any substantive procedures to evaluate whether these customer contracts met the collectability criteria required to recognize revenue. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 3 | Allowance for Credit/Loan Losses | For loans that the issuer assessed collectively for impairment the issuer estimated the ALL using a model that included loan charge-offs as inputs; these charge-offs were determined based in part on the fair value of the underlying assets. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's reviews of the fair values of the underlying assets. 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 | |
| 4 | Allowance for Credit/Loan Losses | For loans that the issuer assessed collectively for impairment the issuer estimated the ALL using a model that included loan charge-offs as inputs; these charge-offs were determined based in part on the fair value of the underlying assets. The following deficiencies were identified: · The firm's approach for substantively testing the ALL was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the ALL because the firm did not test certain information that the issuer used to determine the fair value of the underlying assets. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 |
Issuer D4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | The issuer acquired multiple businesses and determined the fair value of the acquired intangible assets using cash-flow forecasts. The firm's approach for substantively testing the valuation of the acquired intangible assets was to review and test management's process. The following deficiencies were identified: · To evaluate the reasonableness of certain assumptions used in these cash-flow forecasts the firm compared these assumptions to both historical and industry information and identified certain differences. The firm did not perform procedures beyond inquiring of management and obtaining industry growth information used by the issuer to evaluate these differences. (AS 2502.26 .28 .31 and .36) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.31; AS 2502.36 | |
| 2 | Business Combinations | The issuer acquired multiple businesses and determined the fair value of the acquired intangible assets using cash-flow forecasts. The firm's approach for substantively testing the valuation of the acquired intangible assets was to review and test management's process. The following deficiencies were identified: · The firm did not perform procedures to test the accuracy and/or completeness of certain data and reports that (1) the issuer used to develop certain assumptions underlying these cash-flow forecasts and/or (2) the firm used in its procedures. (AS 2502.39) Both financial statement and ICFR audits | AS 2502.39 | |
| 3 | Business Combinations | For one of these acquired businesses the firm selected for testing a control over the accounting for the business combination including the issuer's reviews of the valuation of acquired intangible assets. 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 | |
| 4 | Business Combinations | For one of these acquired businesses the firm selected for testing a control over the accounting for the business combination including the issuer's reviews of the valuation of acquired intangible assets. The firm did not identify and test any controls over the accuracy and completeness of certain information that the control owners used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |
Issuer E4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Liabilities for Self-Insurance Reserves | The issuer estimated certain liabilities for self-insurance reserves using loss triangles that were developed based on the issuer's claims data. The following deficiencies were identified: · For certain types of claims the firm selected for testing two controls that included the issuer's reviews of the accuracy of the claims data from the claims systems. The firm did not evaluate the specific procedures that the control owner performed to assess the accuracy of certain attributes of these data including the claims' incident and reported dates. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Liabilities for Self-Insurance Reserves | The issuer estimated certain liabilities for self-insurance reserves using loss triangles that were developed based on the issuer's claims data. The following deficiencies were identified: · For certain other types of claims the firm did not identify and test any controls that addressed the accuracy and completeness of the claims data from the claims systems. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Liabilities for Self-Insurance Reserves | The issuer estimated certain liabilities for self-insurance reserves using loss triangles that were developed based on the issuer's claims data. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of the determination of these liabilities. The firm did not evaluate the specific procedures that the control owner performed to assess the accurate development of the loss triangles. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 4 | Liabilities for Self-Insurance Reserves | The issuer estimated certain liabilities for self-insurance reserves using loss triangles that were developed based on the issuer's claims data. The following deficiencies were identified: · The firm's approach to substantively test these liabilities was to review and test management's process. The firm did not perform any procedures to test or to sufficiently test controls over the accuracy of the claims data included in the loss triangles. (AS 1105.10; AS 2501.11) Both financial statement and ICFR audits | AS 1105.10; AS 2501.11 |