- Inspection year
- 2020
- Report date
- 10-Mar-2022
- PCAOB release
- 104-2022-086a
- Audits reviewed
- 2
- Audits w/ Part I.A deficiencies
- 2
- Part I.A deficiency rate
- 100%
- Part I.A deficiencies
- 13
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (13)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A12 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer used service organizations to host and/or maintain and manage various information technology (IT) systems that the issuer used to initiate process and record transactions related to the ALL and Investment Securities. The following deficiencies were identified: · The firm did not perform procedures beyond inquiring of management and reading certain related documentation to test that controls over program changes access to programs and computer operations were designed and operating effectively. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | The issuer used service organizations to host and/or maintain and manage various information technology (IT) systems that the issuer used to initiate process and record transactions related to the ALL and Investment Securities. The following deficiencies were identified: · The firm did not perform any procedures to evaluate whether the appropriate complementary user entity controls were implemented and operating effectively in order to achieve the control objectives stated in the service organizations' control reports. (AS 2201.B22) Both financial statement and ICFR audits | AS 2201.B22 | |
| 3 | Allowance for Credit/Loan Losses | Loan risk ratings were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk ratings assigned by the issuer to certain categories of its loans. The issuer used internal loan reviewers (ILRs) and an external loan reviewer (ELR) in the operation of this control. The following deficiencies were identified: · The firm did not evaluate the review procedures that the ILRs 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 | Loan risk ratings were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk ratings assigned by the issuer to certain categories of its loans. The issuer used internal loan reviewers (ILRs) and an external loan reviewer (ELR) in the operation of this control. The following deficiencies were identified: · The ELR reviewed loan risk ratings at an interim date. The firm did not identify and test any controls over the loans that were subject to review by the ELR from the interim date to the issuer's year end. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Allowance for Credit/Loan Losses | Loan risk ratings were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk ratings assigned by the issuer to certain categories of its loans. The issuer used internal loan reviewers (ILRs) and an external loan reviewer (ELR) in the operation of this control. The following deficiencies were identified: · The firm did not identify and test any controls over the reasonableness of loan risk ratings for loans that were not subject to this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Allowance for Credit/Loan Losses | Loan risk ratings were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk ratings assigned by the issuer to certain categories of its loans. The issuer used internal loan reviewers (ILRs) and an external loan reviewer (ELR) in the operation of this control. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of data the ILRs and ELR used in the performance of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Allowance for Credit/Loan Losses | The firm identified deficiencies in certain of the issuer's other controls over the ALL it had selected for testing and concluded that these deficiencies in the aggregate represented a significant deficiency. The firm did not sufficiently evaluate whether the identified control deficiencies represented a material weakness because the firm did not evaluate the magnitude of the potential misstatements resulting from these control deficiencies. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 | |
| 8 | Allowance for Credit/Loan Losses | The firm's approach for substantively testing the quantitative component of the ALL was (1) to review and test management's process and (2) develop an independent expectation. The issuer used loss data from selected peer companies to develop loss rates that it used to estimate the quantitative component of the portion of the ALL related to loans collectively evaluated for impairment. The following deficiencies were identified: · The firm did not obtain an understanding of how the issuer developed its loss rates. (AS 2501.10) Both financial statement and ICFR audits | AS 2501.10 | |
| 9 | Allowance for Credit/Loan Losses | The firm's approach for substantively testing the quantitative component of the ALL was (1) to review and test management's process and (2) develop an independent expectation. The issuer used loss data from selected peer companies to develop loss rates that it used to estimate the quantitative component of the portion of the ALL related to loans collectively evaluated for impairment. The following deficiencies were identified: · To test management's process the firm compared the loss rates developed by the issuer to the loss rates of certain peer companies identified by the issuer. The firm did not sufficiently evaluate the relevance of the loss rates of the peer companies because the firm did not evaluate the comparability of the composition and risk characteristics of the issuer's loan portfolio to the loan portfolios of the peer companies. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 10 | Allowance for Credit/Loan Losses | The firm's approach for substantively testing the quantitative component of the ALL was (1) to review and test management's process and (2) develop an independent expectation. The issuer used loss data from selected peer companies to develop loss rates that it used to estimate the quantitative component of the portion of the ALL related to loans collectively evaluated for impairment. The following deficiencies were identified: · To develop an independent expectation the firm used a combination of the issuer's historical loss rates and the loss rates of the group of peer companies used by the issuer to develop estimated loss ranges and compared these estimated loss ranges to the issuer's loss rates. The firm did not evaluate (1) the reasonableness of the assumptions used to develop these estimated loss ranges and (2) the differences between these estimated loss ranges and issuer's loss rates. (AS 2501.09 .10 and .12) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 11 | Allowance for Credit/Loan Losses | The firm's approach for substantively testing the qualitative component of the ALL was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the qualitative reserve component of the ALL because the firm's procedures to test the qualitative factors the issuer used to determine the reserve component were limited to (1) reading the issuer's ALL memorandum (2) testing certain observable inputs related to existing economic conditions that the issuer used to develop its loss estimates and (3) comparing the qualitative factors the issuer used at year end to those used in prior periods. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 12 | Allowance for Credit/Loan Losses | The firm did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and/or completeness of certain data and reports the firm used in its substantive testing of the ALL. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer B1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of a report obtained from the issuer that it used in its substantive procedures to test revenue. (AS 1105.10) Financial statement audit only | AS 1105.10 |