- Inspection year
- 2020
- Report date
- 08-Apr-2022
- PCAOB release
- 104-2022-116
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 1
- Part I.A deficiency rate
- 33%
- Part I.A deficiencies
- 10
- Part I.B deficiencies
- —
- Report
- View PDF ↗
Deficiencies (10)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A10 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a control that consisted of a quarterly comparison of a system-generated list of invoices used to recognize revenue to the related shipping documents to determine whether revenue was recorded in the correct period. The firm did not identify and test any controls over the accuracy and completeness of the system-generated list used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The firm selected for testing a control that consisted of a quarterly comparison of a system-generated list of invoices used to recognize revenue to the related shipping documents to determine whether revenue was recorded in the correct period. The firm's testing of this control did not provide sufficient appropriate audit evidence of the control's operating effectiveness because the firm limited its testing to one invoice from each instance in which the control was selected for testing. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 3 | Revenue | The firm selected for testing controls that consisted of the review and approval of (1) the quantity price and other terms and conditions for each customer order and (2) any changes to customer orders. The firm did not evaluate the specific review procedures that the control owners performed to determine the appropriateness of (1) the price and quantity for each customer order and (2) changes to customer orders. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 4 | Revenue | The sample sizes the firm used in certain of its substantive procedures to test 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 | |
| 5 | Accounts Receivable | The firm selected for testing a control that consisted of management's review of the accounts receivable aging report to determine whether the allowance for doubtful accounts was appropriate. The firm did not identify and test any controls over the accuracy and completeness of the aging report used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Accounts Receivable | The firm selected for testing a control that consisted of management's review of the accounts receivable aging report to determine whether the allowance for doubtful accounts was appropriate. 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) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Inventory | The firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. The firm did not identify and test any controls over the accuracy and completeness of the system-generated reports used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Inventory | The firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. 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 | |
| 9 | Inventory | The firm's approach for substantively testing the amount of labor and overhead costs capitalized into inventory and the slow-moving and obsolete inventory reserve was to review and test management's processes. The firm did not evaluate the reasonableness of the capitalized labor and overhead costs and the slow-moving and obsolete inventory reserve because the firm did not perform procedures to test certain methods and assumptions the issuer used to capitalize such costs and determine the reserve. (AS 2501.09 .10 and .11) Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 | |
| 10 | Journal Entries | The firm selected for testing manual journal entries meeting certain fraud criteria. The firm did not perform sufficient procedures to test these journal entries because it did not examine the underlying support for the entries and instead limited its procedures to inquiry of management. (AS 2401.61) Both financial statement and ICFR audits | AS 2401.61 |