- Inspection year
- 2020
- Report date
- 09-Jun-2022
- PCAOB release
- 104-2022-144a
- Audits reviewed
- 6
- Audits w/ Part I.A deficiencies
- 3
- Part I.A deficiency rate
- 50%
- Part I.A deficiencies
- 11
- Part I.B deficiencies
- 5
- 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 A6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired two businesses. With respect to one of these business combinations the following deficiencies were identified: · The purchase price for the acquisition included contingent consideration based on forecasted revenue. The issuer estimated the fair value of the initial contingent consideration using certain assumptions. The firm did not perform any procedures to evaluate the fair value of the contingent consideration. (AS 2502.15) Financial statement audit only | AS 2502.15 | |
| 2 | Business Combinations | During the year the issuer acquired two businesses. With respect to one of these business combinations the following deficiencies were identified: · The issuer subsequently remeasured the contingent consideration and recorded the change as an expense. The firm did not sufficiently evaluate whether the change was a result of events that occurred subsequent to the acquisition date and was appropriately recorded as an expense in conformity with FASB ASC Subtopic 805-30 Business Combinations - Goodwill or Gain from Bargain Purchase Including Consideration Transferred because the firm did not identify that the forecasted revenue the issuer used for the remeasurement was consistent with the historical revenue at the acquisition date. (AS 2810.03 and .30) Financial statement audit only | AS 2810.3; AS 2810.30 | |
| 3 | Business Combinations | During the year the issuer acquired two businesses. With respect to one of these business combinations the following deficiencies were identified: · The firm did not perform any procedures to test the fair value of an intangible asset. (AS 2502.15) In addition the firm did not evaluate whether the method used to determine the fair value of this intangible asset was in conformity with FASB ASC 805 Business Combinations. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 4 | Business Combinations | During the year the issuer acquired two businesses. With respect to one of these business combinations the following deficiencies were identified: · The firm did not perform any procedures to evaluate whether all identifiable assets acquired and liabilities assumed were identified and appropriately recorded. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 5 | Business Combinations | With respect to the other business combination the following deficiencies were identified: · The firm's approach for substantively testing the fair value of an acquired intangible asset was to review and test management's process. The firm did not perform procedures beyond inquiry of management to evaluate the reasonableness of certain assumptions used to determine the fair value of this asset. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 6 | Business Combinations | With respect to the other business combination the following deficiencies were identified: · The firm did not perform any substantive procedures to test the fair value of certain other assets acquired and liabilities assumed in this business combination. (AS 2502.15) Financial statement audit only | AS 2502.15 |
Issuer B4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a sample of revenue transactions. In its evaluation of the issuer's revenue recognition the firm did not evaluate whether the identification of performance obligations and the allocation of the transaction price to the performance obligations were appropriate given the existence of contradictory evidence. (AS 2301.08; AS 2810.03) Financial statement audit only | AS 2301.8; AS 2810.3 | |
| 2 | Revenue | The firm used data from one of the issuer's systems to test certain revenue but did not test or in the alternative identify and test controls over the accuracy and completeness of this data. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 3 | Debt | The issuer reported certain convertible notes that included embedded conversion features that were effective after a certain period of time. The issuer recorded a derivative liability associated with these features after that period of time expired. The firm did not sufficiently evaluate whether the derivative liability should have been initially recorded on the issuance date of the convertible notes because it did not perform procedures to determine whether the feature met the definition of a derivative and whether the issuer had sufficient authorized and unissued shares to convert any of the notes at each note's issuance date and at year end. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 4 | Debt | Certain of these notes contained default clauses related to the issuer's obligation to reserve a sufficient number of shares from its authorized and unissued common stock. The firm did not evaluate whether these notes were in default at the time of issuance and therefore the derivative liability should have been recorded at the time of issuance. (AS 2301.08; AS 2810.03) Financial statement audit only | AS 2301.8; AS 2810.3 |
Issuer C1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Oil and Gas Properties | To evaluate the possible impairment of proved oil and gas reserves and make certain required disclosures the issuer engaged an external specialist to estimate the present value of future net cash flows from these reserves using the issuer's projected operating costs. The firm did not sufficiently test these projected operating costs because it limited its procedures to comparing the first year of projected operating costs to the prior-year actual operating costs. (AS 1210.12) Financial statement audit only | AS 1210.12 |