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Ernst & Young Associates LLP
India · Ernst & Young Global Limited · Triennially Inspected
- Inspection year
- 2021
- Report date
- 08-Dec-2022
- PCAOB release
- 104-2023-032
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 1
- Part I.A deficiency rate
- 33%
- Part I.A deficiencies
- 16
- Part I.B deficiencies
- 3
- Report
- View PDF ↗
Deficiencies (16)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A16 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The issuer used an information-technology (IT) system to initiate process and record transactions related to certain revenue accounts receivable and inventory. In its testing over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT system. As a result of the following deficiencies in the firm's testing of IT general controls (ITGCs) the firm's testing of these automated and IT-dependent controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Accounts Receivable | The issuer used an information-technology (IT) system to initiate process and record transactions related to certain revenue accounts receivable and inventory. In its testing over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT system. With respect to change management: - The firm selected for testing certain change management controls that consisted of (1) testing of changes in a test environment and (2) approval of these changes prior to their implementation into the production environment. The firm did not evaluate the procedures that the control owners performed to evaluate the appropriateness of certain types of changes made to the IT system or otherwise identify and test other controls to address the change management risks. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Accounts Receivable | The issuer used an information-technology (IT) system to initiate process and record transactions related to certain revenue accounts receivable and inventory. In its testing over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT system. With respect to change management: - The issuer's IT personnel processed certain changes directly into the production environment of the IT system. The firm did not identify and test any controls over these direct changes. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Accounts Receivable | The issuer used an information-technology (IT) system to initiate process and record transactions related to certain revenue accounts receivable and inventory. In its testing over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT system. With respect to change management: - The firm's testing of certain automated controls over customer orders was not sufficient because the firm did not test changes made into the production environment of the IT system for those controls after the date of testing. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 5 | Accounts Receivable | For revenue and accounts receivable which were affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The issuer recognized certain revenue net of chargeback and rebate accruals. The chargeback and rebate accruals were based on inventory quantity and claims data transmitted from certain of the issuer's customers to its IT system through an electronic data interface (EDI). In its testing of controls over chargeback and rebate accruals the firm tested certain automated controls and IT-dependent manual controls that used this EDI data. The firm did not identify and test any controls over the accuracy and completeness of the inventory information received through EDI that was used in the operation of the controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Accounts Receivable | For revenue and accounts receivable which were affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The issuer recognized certain revenue net of chargeback and rebate accruals. The chargeback and rebate accruals were based on inventory quantity and claims data transmitted from certain of the issuer's customers to its IT system through an electronic data interface (EDI). In its testing of controls over chargeback and rebate accruals the firm tested certain automated controls and IT-dependent manual controls that used this EDI data. The firm used a 'test of one' approach to test an automated control over the claims data but did not perform testing of ITGCs over the EDI to allow for the use of such an approach. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Accounts Receivable | The firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy and completeness of data and reports obtained from the issuer's IT system that it used to test certain revenue. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 8 | Accounts Receivable | The sample sizes the firm used in its substantive procedures to test the existence of certain accounts receivable 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 deficiencies in the firm's IT control testing. (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 | |
| 9 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over inventory that consisted of the performance of physical inventory counts at certain locations by a third-party stock counter. The issuer designed the control to exclude a portion of inventory from those counts. In evaluating the design of the control the firm did not evaluate the effect of the issuer's exclusion of a portion of inventory from the physical counts on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 10 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing controls over certain inventory that consisted of the issuer's review of the monthly weighted average cost per unit as computed by the issuer's IT system through an automated control that was used to record the value of inventory. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the weighted average cost per unit. Further the firm did not test the configuration or programming of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 11 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not test the configuration or programming of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 12 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not identify and test any controls over the accuracy and completeness of a system-generated report that was used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 13 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not perform any substantive procedures to test or in the alternative test controls over the accuracy of the system-generated report which it used to evaluate the reasonableness of the slow-moving inventory provision. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 14 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm did not perform any substantive procedures to test the cost of certain inventory including the allocation of direct labor and overhead costs beyond comparing the cost of the inventory at year end to cost of the inventory at the end of the prior year. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 15 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm did not perform any substantive procedures to test or with respect to change management to sufficiently test controls over the accuracy and completeness of information generated from the issuer's IT system that was used to substantively test the cost of certain inventory. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 16 | Inventory | For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of an obsolescence provision for certain inventory that consisted of the issuer's review of a system-generated provision report and approval of related adjustments to inventory. The firm did not identify and test any controls over the (1) data input into the issuer's IT system and used to calculate the provision and (2) accuracy and completeness of the system-generated report that was used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |