- Inspection year
- 2020
- Report date
- 16-Dec-2021
- PCAOB release
- 104-2022-003a
- Audits reviewed
- 14
- Audits w/ Part I.A deficiencies
- 9
- Part I.A deficiency rate
- 64%
- Part I.A deficiencies
- 22
- Part I.B deficiencies
- 2
- Report
- View PDF ↗
Deficiencies (22)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A7 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not identify and test any controls over the accuracy and completeness of the shipment information from the system that the issuer used to record revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The firm selected for testing controls that consisted of the issuer's review of sales orders. The firm used the results of its substantive testing of this revenue as evidence that these controls were operating effectively. The firm's procedures did not provide sufficient appropriate audit evidence because the firm did not directly test the review procedures that the control owners performed. (AS 2201.42 .44 and .B9) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44; AS 2201.B9 | |
| 3 | Revenue | The firm selected for testing a control that consisted of the issuer's review of the calculation of the rebate accrual. The firm did not identify and test any controls over the accuracy and completeness of the system-generated reports used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Inventory | The firm did not identify and test any controls that addressed the issuer's determination of the cost of its inventory and whether the amounts relieved from inventory and recorded to cost of goods sold were accurate. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Inventory | The firm selected for testing the issuer's daily cycle-count control over the existence of this inventory. The small number of cycle-counts that the firm selected for testing did not provide sufficient appropriate audit evidence in light of the frequency of the operation of the control. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 6 | Inventory | The firm selected for testing a control that consisted of the issuer's review of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of the system-generated report used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Inventory | Due to the deficiency related to the cycle-count control discussed above the firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11) Both financial statement and ICFR audits | AS 2510.11 |
Issuer B3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue from contracts over time using an input method based on costs incurred. The following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of the estimated costs to complete open contracts at year end beyond (1) comparing in the aggregate estimated total costs for open contracts as of the prior year end to the revised estimated total costs for those contracts as of the current year end and (2) obtaining for two open contracts a summary of actual costs incurred during a period of time subsequent to year end and inquiring of management. (AS 2501.07) Financial statement audit only | AS 2501.7 | |
| 2 | Revenue | The issuer recognized certain revenue from contracts over time using an input method based on costs incurred. The following deficiencies were identified: · The firm used certain labor information in its substantive testing of the costs incurred to date that the issuer used to recognize this revenue but did not test or in the alternative test any controls over the accuracy and completeness of this information. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 3 | Revenue | The firm identified the issuer's omission of a required disclosure under FASB ASC Topic 606 Revenue from Contracts with Customers related to the disaggregation of revenue recognized over time and at a point in time. The firm concluded that the omission did not represent a material misstatement but did not evaluate the significance of a misstatement in the total amount of point-in-time revenue disclosed. (AS 2810.17) Financial statement audit only | AS 2810.17 |
Issuer C3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue based on electronic activity that was tracked using an internally developed information-technology (IT) system. In its substantive testing of this revenue the firm used activity information obtained from external parties to test the electronic activity in this system but did not perform any procedures to evaluate the reliability of this activity information. (AS 1105.04 and .06) Financial statement audit only | AS 1105.4; AS 1105.6 | |
| 2 | Revenue | The issuer recognized certain other revenue based on user activity in an electronic environment that was tracked and provided by two external parties. The firm obtained this information from the issuer and used it in its substantive testing of this revenue. The following deficiencies were identified: · With respect to the user activity information provided by one external party the firm did not sufficiently test the accuracy and completeness of the information because it did not test the parameters that the issuer input into the IT system that the external party used to track the activity. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 3 | Revenue | The issuer recognized certain other revenue based on user activity in an electronic environment that was tracked and provided by two external parties. The firm obtained this information from the issuer and used it in its substantive testing of this revenue. The following deficiencies were identified: · With respect to the user activity information provided by the other external party the firm did not sufficiently test the accuracy and completeness of the information because its procedures were limited to obtaining an understanding of and testing certain IT general controls over the IT system that the external party used to track the activity. (AS 1105.10) Financial statement audit only | AS 1105.10 |
Issuer D3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer entered into revenue arrangements with multiple performance obligations. The firm did not perform any substantive procedures to evaluate whether the issuer's identification of the performance obligations was in conformity with FASB ASC Topic 606 and whether such obligations had been satisfied before revenue was recognized. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Revenue | The issuer recognized revenue from certain other arrangements based on information provided by external parties. The firm obtained this information from the issuer and used it in its substantive testing of this revenue. The following deficiencies were identified: · The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of this information. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 3 | Revenue | The issuer recognized revenue from certain other arrangements based on information provided by external parties. The firm obtained this information from the issuer and used it in its substantive testing of this revenue. The following deficiencies were identified: · The firm selected the issuer's largest revenue transactions for testing but did not perform any substantive procedures to test the remaining portion of this revenue. (AS 1105.27) Financial statement audit only | AS 1105.27 |
Issuer E2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | The issuer held certain investments in privately held companies that were categorized as level 3 within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The following deficiencies were identified: · The firm's approach for substantively testing the valuation of certain of these investments was to review and test management's process. The firm did not perform any procedures to test the share price the issuer used to record the fair value of each investment beyond (1) obtaining for one investment an unexecuted consent of the investee company's board of directors regarding a possible equity transaction and (2) obtaining for the other investments an email that the issuer had received from a broker indicating the weighted-average share price for trades that the broker executed in the last quarter of the year under audit. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 2 | Investments | The issuer held certain investments in privately held companies that were categorized as level 3 within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The following deficiencies were identified: · The firm's approach for substantively testing the valuation of another investment was to develop an independent estimate. The firm did not evaluate the appropriateness of the peer companies determined by the issuer that the firm used in developing its fair value estimate of this investment. (AS 2502.40) Financial statement audit only | AS 2502.40 |
Issuer F1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recorded two types of revenue for one of its subsidiaries net of customer discounts rebates and other deductions. The firm did not perform any substantive procedures to test these sales deductions beyond comparing the total amount recorded by the issuer to an amount the firm calculated by applying the issuer's historical sales deduction rates to the gross sales for each revenue type. (AS 2301.08) Financial statement audit only | AS 2301.8 |
Issuer G1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | Certain of the issuer's inventory was subject to weekly cycle counts and the issuer used system-generated reports to determine the frequency with which each item should be counted and to select the items that should be counted each week. The firm did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and completeness of these reports. As a result the firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 1105.10; AS 2510.11) Financial statement audit only | AS 1105.10; AS 2510.11 |
Issuer H1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | For certain investments the issuer held the firm performed confirmation procedures for a small number of these investments but did not perform any procedures to obtain evidence that the remaining population of these investments existed at year end. (AS 2503.21) Financial statement audit only | AS 2503.21 |
Issuer I1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Leases | The firm selected for testing a control that included the review of the issuer's accounting for leases for conformity with FASB ASC Topic 842 Leases. The firm did not evaluate the review procedures that the control owner 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) ICFR audit only | AS 2201.42; AS 2201.44 |