- Inspection year
- 2020
- Report date
- 16-Dec-2021
- PCAOB release
- 104-2022-004a
- Audits reviewed
- 12
- Audits w/ Part I.A deficiencies
- 3
- Part I.A deficiency rate
- 25%
- Part I.A deficiencies
- 11
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (11)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A9 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The issuer used two information-technology (IT) systems to process and record transactions related to revenue accounts receivable and inventory for this business unit. The following deficiencies were identified: • With respect to the first system the issuer maintained separate instances of this system at each of its locations; each instance represented a separate occurrence of the system that could be configured differently. The firm selected for testing certain automated controls over this system. The firm's approach to testing only one instance of the operation of these automated controls was inappropriate because it was based on an unsupported assumption that all instances of this system were configured the same way and that the automated controls for each instance were designed and operated the same way. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Accounts Receivable | The issuer used two information-technology (IT) systems to process and record transactions related to revenue accounts receivable and inventory for this business unit. The following deficiencies were identified: • The firm identified control deficiencies related to certain controls over access to the second system. The firm did not sufficiently evaluate the severity of these control deficiencies because its procedures were limited to evaluating whether the changes made to the system in the current year were appropriate without evaluating the magnitude of the potential misstatement that could have resulted from inappropriate access to this system. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 | |
| 3 | Accounts Receivable | The issuer used two information-technology (IT) systems to process and record transactions related to revenue accounts receivable and inventory for this business unit. The following deficiencies were identified: • The firm selected for testing certain automated and IT-dependent manual controls that used information generated or maintained by the second system. The accuracy and completeness of this information depended on effective IT general controls (ITGCs). Due to the deficiency in the firm's evaluation of the ITGC control deficiencies 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 | |
| 4 | Revenue | The firm selected for testing a control that consisted of the issuer's review of invoices to determine whether revenue was appropriately recorded. The firm did not identify and test any controls that addressed the accuracy and completeness of the price and quantity data that the issuer used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Revenue | The sample sizes the firm used in certain of its substantive procedures to test this revenue 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 the 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 | |
| 6 | Inventory | The issuer performed cycle counts of inventory held at certain locations. The following deficiencies were identified: · The firm did not identify and test any controls over the issuer's monitoring of its cycle-count program. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Inventory | The issuer performed cycle counts of inventory held at certain locations. The following deficiencies were identified: · The firm selected for testing certain cycle-count controls that it assessed as having a higher risk of failure. To test the design and operating effectiveness of these controls the firm selected a sample of cycle counts. The firm observed a small number of these counts and for certain of the remaining counts inquired of the issuer's personnel and inspected cycle-count documentation. The firm's procedures for the unobserved counts did not provide sufficient appropriate audit evidence given the assessed higher risk associated with these controls. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 8 | Inventory | The issuer performed cycle counts of inventory held at certain locations. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the existence of inventory held at certain of these locations. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 9 | Inventory | The firm selected for testing a control that consisted of the issuer's review and approval of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of the reports that the issuer used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |
Issuer B1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business. The firm did not sufficiently test the fair value of certain consideration transferred by the issuer because its procedures were limited to recalculating this consideration based on the terms of the purchase agreement without evaluating certain relevant available market information. (AS 2502.26 .28 .31 and .36) Financial statement audit only | AS 2502.26; AS 2502.28; AS 2502.31; AS 2502.36 |
Issuer C1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | During the year the issuer recorded revenue from a bill-and-hold arrangement with one of its customers. The firm did not perform any procedures to evaluate whether the issuer met certain revenue recognition criteria for bill-and-hold arrangements beyond reading a memorandum prepared by the issuer and inquiring of management. (AS 2301.08) Financial statement audit only | AS 2301.8 |