- Inspection year
- 2021
- Report date
- 07-Nov-2022
- PCAOB release
- 104-2023-012
- Audits reviewed
- 9
- Audits w/ Part I.A deficiencies
- 4
- Part I.A deficiency rate
- 44%
- Part I.A deficiencies
- 10
- Part I.B deficiencies
- 5
- 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 A2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm did not identify and evaluate the significance to the financial statements of an IFRS departure related to the valuation of certain inventory. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Inventory | The firm's approach for substantively testing the reserve for excess and slow moving inventory included developing an independent expectation of the issuer's net inventory including finished goods inventory and work-in-process inventory. The firm developed its expectation using gross revenue data for the last three months of the year the period of which was consistent with the return period for finished goods inventory. The firm did not perform procedures to support the appropriateness of using three months of gross revenue as the basis for developing its expectation of net inventory. (AS 2501.09 .10 and .12) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements ending on or after December 15 2020.] Financial statement audit only | AS 2501.9; AS 2501.10; AS 2501.12 |
Issuer B2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Goodwill and Intangible Assets | The issuer identified indicators of potential impairment and performed an impairment analysis for each cash-generating unit. The firm selected for testing a control that consisted of the issuer's review of the carrying value and recoverable amount calculation used in the impairment analysis. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the carrying value and recoverable amount calculation used in these analyses. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | The issuer entered into a contract with a customer in which revenue was recognized on a gross or net basis depending on the nature of the sales transactions and terms of the contract. In its testing the firm identified evidence indicating that revenue from certain sales transactions recognized on a net basis may have met the criteria prescribed in International Financial Reporting Standard 15 Revenue from Contracts with Customers ('IFRS 15') for recognition on a gross basis. The firm did not perform any substantive procedures to evaluate (1) this contradictory evidence and the related effect on revenue recognition and (2) whether the issuer's recognition of revenue from these transactions was in conformity with IFRS 15. (AS 2810.03 and .30) Both financial statement and ICFR audits | AS 2810.3; AS 2810.30 |
Issuer C4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | For loans that were collectively evaluated for impairment the issuer estimated the ALL using models and methodologies based on assumptions judgment and other data and applying certain post-model adjustments. The issuer determined post-model adjustments by comparing the model to a benchmark and/or considering data for each loan portfolio. The following deficiencies were identified: - The firm selected for testing a control that consisted of the issuer's review of the post-model adjustments for each loan portfolio. The firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness and reasonableness of certain post-model adjustments. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | For loans that were collectively evaluated for impairment the issuer estimated the ALL using models and methodologies based on assumptions judgment and other data and applying certain post-model adjustments. The issuer determined post-model adjustments by comparing the model to a benchmark and/or considering data for each loan portfolio. The following deficiencies were identified: - The firm selected for testing a control that consisted of the issuer's review of the post-model adjustments for each loan portfolio. The firm did not identify and test any controls over the (1) methods and assumptions used by the issuer to determine the benchmarks used in the operation of this control and (2) accuracy and completeness of certain data used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Allowance for Credit/Loan Losses | For loans that were collectively evaluated for impairment the issuer estimated the ALL using models and methodologies based on assumptions judgment and other data and applying certain post-model adjustments. The issuer determined post-model adjustments by comparing the model to a benchmark and/or considering data for each loan portfolio. The following deficiencies were identified: - The firm selected for testing another control that consisted of the issuer's annual review of the appropriateness of the assumptions used in the model for each loan portfolio. The firm did not identify that this control was not designed to allow the issuer to evaluate whether certain factors would have an effect on the issuer's models due to the frequency and timing in which this control operated. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 4 | Allowance for Credit/Loan Losses | For loans that were collectively evaluated for impairment the issuer estimated the ALL using models and methodologies based on assumptions judgment and other data and applying certain post-model adjustments. The issuer determined post-model adjustments by comparing the model to a benchmark and/or considering data for each loan portfolio. The following deficiencies were identified: - The firm's approach for substantively testing the ALL was to review and test management's process. The firm did not perform procedures to evaluate the reasonableness of the (1) methods and assumptions used by the issuer to determine the benchmarks and (2) assumptions used by the issuer to develop certain post-model adjustments both of which were used by the issuer to determine the ALL. (AS 2501.09 .10 and .11) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements ending on or after December 15 2020.] Both financial statement and ICFR audits | AS 2501.9; AS 2501.10; AS 2501.11 |
Issuer D2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Goodwill | The firm selected for testing controls that consisted of the issuer's reviews of forecasts and certain assumptions used in the annual goodwill impairment analyses. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the forecasts and certain assumptions used in these analyses. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Goodwill | The firm selected for testing controls that consisted of the issuer's reviews of forecasts and certain assumptions used in the annual goodwill impairment analyses. The firm did not identify and test any controls over the accuracy and completeness of certain data used in the operation of one of these controls. (AS 2201.39) ICFR audit only | AS 2201.39 |