- Inspection year
- 2021
- Report date
- 07-Nov-2022
- PCAOB release
- 104-2023-013a
- Audits reviewed
- 7
- Audits w/ Part I.A deficiencies
- 6
- Part I.A deficiency rate
- 86%
- Part I.A deficiencies
- 23
- Part I.B deficiencies
- 4
- Report
- View PDF ↗
Deficiencies (23)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Warrants | During the audit the firm did not identify and appropriately address that the issuer's accounting for warrants as equity was not in conformity with FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30) Unrelated to our review the issuer reevaluated its accounting for these warrants and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. Financial statement audit only | AS 2810.30 | |
| 2 | Warrants | In its restated financial statements the issuer recorded these warrants as liabilities and engaged a specialist to determine the fair value for the warrants. The firm's approach for substantively testing the fair values of these warrants was to test the issuer's process. The firm did not evaluate the relevance and reliability of data the company's specialist obtained from an external source and used to develop a significant assumption. (AS 1105.A8a) Financial statement audit only | AS 1105.A8a | |
| 3 | Warrants | Unrelated to our review the issuer reevaluated its accounting for these warrants and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. In its restated financial statements the issuer recorded these warrants as liabilities and engaged a specialist to determine the fair value for the warrants. The firm's approach for substantively testing the fair values of these warrants was to test the issuer's process. The firm did not evaluate the reasonableness of this significant assumption including whether it was consistent with relevant information. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b | |
| 4 | Warrants | Unrelated to our review the issuer reevaluated its accounting for these warrants and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. In its restated financial statements the issuer recorded these warrants as liabilities and engaged a specialist to determine the fair value for the warrants. The firm's approach for substantively testing the fair values of these warrants was to test the issuer's process. The firm also did not evaluate the reasonableness of an assumption that was developed by the issuer and used by the company's specialist. (AS 2501.16) Financial statement audit only | AS 2501.16 | |
| 5 | Equity | The firm did not identify and appropriately address that the issuer's accounting for certain redeemable shares as permanent equity was not in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity. (AS 2810.30) Financial statement audit only | AS 2810.30 |
Issuer B6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a controlling interest in a business and engaged a specialist to estimate the fair value of both an acquired intangible asset and the acquired business. The firm's approach for substantively testing the fair value of each was to test the issuer's process. The following deficiencies were identified: - Beyond comparing certain forecasted assumptions to actual results for the period subsequent to the acquisition the firm did not evaluate the reasonableness of certain assumptions provided by the issuer and used by the company's specialist. (AS 2501.16) Financial statement audit only | AS 2501.16 | |
| 2 | Business Combinations | During the year the issuer acquired a controlling interest in a business and engaged a specialist to estimate the fair value of both an acquired intangible asset and the acquired business. The firm's approach for substantively testing the fair value of each was to test the issuer's process. The following deficiencies were identified: - The firm did not evaluate the reasonableness of certain assumptions developed by the company's specialist including the consistency of these assumptions with relevant information. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b | |
| 3 | Business Combinations | During the year the issuer acquired a controlling interest in a business and engaged a specialist to estimate the fair value of both an acquired intangible asset and the acquired business. The firm's approach for substantively testing the fair value of each was to test the issuer's process. The following deficiencies were identified: - The firm did not sufficiently evaluate the relevance and reliability of certain data from sources external to the issuer that were used by the company's specialist in developing certain assumptions because it limited its procedures to inquiry of the company's specialist and obtaining information from the company's specialist. (AS 1105.A8a) Financial statement audit only | AS 1105.A8a | |
| 4 | Goodwill | The issuer used the fair value of the acquired business at the acquisition date to record a goodwill impairment at year end. The following deficiencies were identified: - The firm did not evaluate whether the impairment of goodwill was the result of an error in the initial valuation at the acquisition date. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 5 | Goodwill | The issuer used the fair value of the acquired business at the acquisition date to record a goodwill impairment at year end. The following deficiencies were identified: - The firm did not perform procedures to determine whether the fair value of the acquired business at the acquisition date was an appropriate or relevant measurement for use in the goodwill impairment analysis as of year end. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 6 | Goodwill | The issuer used the fair value of the acquired business at the acquisition date to record a goodwill impairment at year end. The following deficiencies were identified: - The firm did not identify and appropriately address a GAAP departure related to the issuer's omission of disclosures related to the facts and circumstances leading to the goodwill impairment as required by FASB ASC Topic 350 Intangibles — Goodwill and Other. (AS 2810.30 and .31) Financial statement audit only | AS 2810.30; AS 2810.31 |
Issuer C6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Cash Equivalents | The firm selected for testing controls over the review of journal entries to record cash equivalents and the presentation and disclosure of cash equivalents. The firm did not evaluate the specific review procedures that the control owners performed to determine the completeness of cash equivalents and whether certain investments met the definition and requirements of cash equivalents. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Cash Equivalents | The firm did not sufficiently evaluate whether certain investments were appropriately presented as cash equivalents because it did not obtain an understanding of and evaluate the nature of those investments including the underlying investments and the associated risks. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 3 | Cash Equivalents | The firm did not perform any substantive procedures to test whether the description of certain cash equivalents in the notes to the financial statements was appropriate. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 4 | Long-Term Investments | The issuer reported the valuation of certain investments based on investee financial results including both audited and unaudited financial statements and financial statements that were prepared using different accounting principles. The following deficiencies were identified: - The firm selected for testing a control over the valuation of these investments including the review of an impairment analysis of these investments. 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 | |
| 5 | Long-Term Investments | The issuer reported the valuation of certain investments based on investee financial results including both audited and unaudited financial statements and financial statements that were prepared using different accounting principles. The following deficiencies were identified: - The firm did not apply sufficient auditing procedures to the unaudited financial statements for certain investees because it limited its procedures to a fluctuation analysis. (AS 1105.63) Both financial statement and ICFR audits | AS 1105.B3 | |
| 6 | Long-Term Investments | The issuer reported the valuation of certain investments based on investee financial results including both audited and unaudited financial statements and financial statements that were prepared using different accounting principles. The following deficiencies were identified: - The firm did not obtain sufficient appropriate audit evidence for an investee's financial statements prepared using different accounting principles because it did not perform procedures to obtain evidence related to significant differences in accounting principles. (AS 1105.61 and .B2) Both financial statement and ICFR audits | AS 1105.B1; AS 1105.B2 |
Issuer D4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer entered into contracts with certain customers that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. To substantively test revenue the firm selected a sample of invoices and performed procedures. The following deficiencies were identified: - With respect to invoices related to contracts for which all revenue was recognized by year end the firm did not perform procedures to test if the issuer's performance obligations were satisfied before revenue was recognized beyond obtaining issuer-prepared documents. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Revenue | The issuer entered into contracts with certain customers that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. To substantively test revenue the firm selected a sample of invoices and performed procedures. The following deficiencies were identified: - With respect to invoices related to contracts that were open at year end the firm did not test the accuracy and completeness of certain aspects of schedules used by the issuer to determine the estimated cost for the project or the completeness of reports used to track total cost incurred for the project. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 3 | Revenue | The issuer entered into contracts with certain customers that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. To substantively test revenue the firm selected a sample of invoices and performed procedures. The following deficiencies were identified: - The firm did not perform sufficient procedures to test the estimated costs to complete for contracts open at year end because the firm limited its procedures to comparing total actual costs for one contract that was completed subsequent to year end to estimated costs at year end. (AS 2501.07) Financial statement audit only | AS 2501.7 | |
| 4 | Revenue | The issuer entered into contracts with certain customers that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. To substantively test revenue the firm selected a sample of invoices and performed procedures. The following deficiencies were identified: - With respect to testing revenue recognition the firm drew its sample from the population of the issuer's invoices that were not necessarily representative of the revenue recorded during the year. (AS 2315.17) Financial statement audit only | AS 2315.17 |
Issuer E1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Equity | The firm did not identify and appropriately address that the issuer's accounting for certain redeemable shares as permanent equity was not in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity. (AS 2810.30) Financial statement audit only | AS 2810.30 |
Issuer F1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer engaged a manufacturer to produce and distribute certain of its products. The firm did not perform sufficient procedures to evaluate whether the issuer was acting as a principal or as the agent for this revenue in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. Specifically in its evaluation the firm did not evaluate (1) the insurable risk of inventory (2) the manufacturer's discretion to set minimum prices for inventory sold to the issuer's customers and (3) the manufacturer's responsibility for honoring the limited warranty extended to the issuer's customers. (AS 2810.30) Financial statement audit only | AS 2810.30 |