- Inspection year
- 2020
- Report date
- 08-Apr-2022
- PCAOB release
- 104-2022-117a
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 2
- Part I.A deficiency rate
- 67%
- Part I.A deficiencies
- 18
- Part I.B deficiencies
- —
- Report
- View PDF ↗
Deficiencies (18)
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 | Business Combinations | During the year the issuer acquired a business. The firm selected for testing a control that consisted of management's review of the reasonableness of the significant inputs and assumptions used to record the business combination. 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 | |
| 2 | Business Combinations | During the year the issuer acquired a business. The firm selected for testing a control that consisted of management's review of the reasonableness of the significant inputs and assumptions used to record the business combination. The firm did not identify and test any controls over the accuracy and completeness of certain issuer data and the relevance and reliability of external data used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Business Combinations | The issuer used an external valuation specialist to determine the fair value of the acquired entity. The firm's approach for substantively testing the fair value of the acquired entity was to review and test management's process. The firm did not perform any procedures to test the projections developed by the issuer that the external valuation specialist used. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 4 | Business Combinations | The issuer used an external valuation specialist to determine the fair value of the acquired entity. The firm's approach for substantively testing the fair value of the acquired entity was to review and test management's process. The firm did not evaluate the reasonableness of the assumptions developed by the external valuation specialist. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 | |
| 5 | Significant Accounts | The issuer used a valuation model to determine the fair value of a significant account. The firm selected for testing certain controls that consisted of management's review of the reasonableness of the assumptions used in the valuation model and the output from the valuation model. 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 | |
| 6 | Significant Accounts | The issuer used a valuation model to determine the fair value of a significant account. The firm selected for testing certain controls that consisted of management's review of the reasonableness of the assumptions used in the valuation model and the output from the valuation model. The firm did not identify and test any controls over the accuracy and completeness of the data used in the operation of the controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Significant Accounts | The firm did not identify and test the necessary complementary user controls to place reliance on or identify and test any other controls over the accuracy and completeness of certain assumptions and reports from a service organization used in the operation of controls. (AS 2201.39 and .B22) Both financial statement and ICFR audits | AS 2201.39; AS 2201.B22 | |
| 8 | Significant Accounts | The firm used the work of an external party engaged by management to test certain controls that addressed this significant account. The firm did not assess the competence and objectivity of the external party. (AS 2201.18) Both financial statement and ICFR audits | AS 2201.18 | |
| 9 | Significant Accounts | The firm used the work of an external party engaged by management to test certain controls that addressed this significant account. The firm did not evaluate the quality and effectiveness of the external party's work. (AS 2605.24) Both financial statement and ICFR audits | AS 2605.24 | |
| 10 | Significant Accounts | The firm's approach for substantively testing the fair value of the significant account was to review and test management's process. The firm did not evaluate the reasonableness of certain assumptions used to determine the fair value. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 | |
| 11 | Significant Accounts | The firm's approach for substantively testing the fair value of the significant account was to review and test management's process. The firm not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy and completeness of the internal data and did not evaluate the relevance and reliability of the external data the issuer used to develop certain assumptions. (AS 2502.26 .28 and .39) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.39 | |
| 12 | Significant Accounts | The firm's approach for substantively testing the fair value of the significant account was to review and test management's process. The firm did not test whether the fair value measurement was accurately calculated from the data and the issuer's assumptions. (AS 2502.39) Both financial statement and ICFR audits | AS 2502.39 |
Issuer B6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The firm selected for testing controls that consisted of management's review of qualitative factors and the reasonableness of loan grade basis points used in the determination of the ALL. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the qualitative factors and loan grade basis points. (AS 2301.19 and .21) Financial statement audit only | AS 2301.19; AS 2301.21 | |
| 2 | Allowance for Credit/Loan Losses | The firm selected for testing a control that consisted of management's review of assigned loan risk ratings. The firm did not identify that this control only operated over newly originated loans and as designed would not prevent or detect a material misstatement related to the assignment of loan risk ratings to loans in the issuer's existing loan portfolio. (AS 2301.19) Financial statement audit only | AS 2301.19 | |
| 3 | Allowance for Credit/Loan Losses | The firm did not perform procedures to evaluate the reasonableness of the qualitative factors and loan grade basis points used by the issuer to determine the ALL beyond comparing the current period qualitative factors and loan grade basis points to those used in prior periods. (AS 2501.07) Financial statement audit only | AS 2501.7 | |
| 4 | Allowance for Credit/Loan Losses | The sample size the firm used in certain of its substantive procedures to test the reasonableness of assigned loan risk ratings was too small to provide sufficient appropriate audit evidence because these procedures were based on a level of control reliance that was not supported due to the deficiency in the firm's control testing described above. Further the sample size the firm used in certain of its substantive procedures to test the reasonableness of assigned loan risk ratings was too small to provide sufficient appropriate audit evidence because the firm did not take into account the relevant factors in determining its sample size including tolerable misstatement for the population the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2301.16 .18 and .37; AS 2315.16 .19 .23 and .23A) Financial statement audit only | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.16; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 5 | Investment Securities | The firm selected for testing a control that consisted of management's review of other-than-temporary impairment of investment securities. The firm did not identify that this control only operated over certain investment securities and as designed would not prevent or detect a material misstatement related to the other investment securities. (AS 2301.19) Financial statement audit only | AS 2301.19 | |
| 6 | Investment Securities | The sample size the firm used in certain of its substantive procedures to test the valuation of investment securities was 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 deficiency in the firm's control testing discussed above. Further the sample size the firm used in certain of its substantive procedures to test the valuation of investment securities was too small to provide sufficient appropriate audit evidence because the firm did not take into account the relevant factors in determining its sample size including tolerable misstatement for the population the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2301.16 .18 and .37; AS 2315.16 .19 .23 and .23A) Financial statement audit only | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.16; AS 2315.19; AS 2315.23; AS 2315.23A |