- Inspection year
- 2021
- Report date
- 08-Dec-2022
- PCAOB release
- 104-2023-034
- Audits reviewed
- 8
- Audits w/ Part I.A deficiencies
- 5
- Part I.A deficiency rate
- 63%
- Part I.A deficiencies
- 11
- Part I.B deficiencies
- 1
- 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 A5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deposits | The firm identified a deficiency in the design and operating effectiveness of a control over deposits that consisted of the reconciliation of in-process suspense and non-post deposit account balances from the deposit subsidiary ledger to the general ledger. The firm identified and tested controls that it believed would mitigate the deficiency. The firm did not identify that (1) the compensating controls tested did not address the in-process suspense and non-post reconciling items subject to the control and (2) one of the compensating controls was dependent on the effectiveness of the deficient control. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Deposits | The firm used negative confirmations to substantively test the existence of deposits. This procedure did not provide sufficient appropriate audit evidence because it was based on a combined assessed level of inherent and control risk of low that was not supported due to the deficiency in the firm's control testing discussed above. (AS 2310.20) Both financial statement and ICFR audits | AS 2310.20 | |
| 3 | Journal Entries | The firm identified a fraud risk related to the potential for management override of controls and determined that certain individuals could both initiate and record journal entries without any secondary review or approval. To address this fraud risk the firm identified journal entries that met certain criteria and haphazardly selected certain of those journal entries for testing without having a basis for its selection. For certain other journal entries that met these criteria the firm did not examine the underlying support for these entries and instead limited its procedures to inquiring of management and/or evaluating the journal entry descriptions. (AS 2401.61) Both financial statement and ICFR audits | AS 2401.61 | |
| 4 | Journal Entries | The firm identified a fraud risk related to the potential for management override of controls and determined that certain individuals could both initiate and record journal entries without any secondary review or approval. To address this fraud risk the firm identified journal entries that met certain criteria and haphazardly selected certain of those journal entries for testing without having a basis for its selection. The firm did not identify or test any controls over the recording of journal entries that would address the fraud risk identified. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Control Deficiencies | The issuer's internal audit group identified certain deficiencies in the issuer's controls related to mortgage loans that it had selected for testing. The firm did not evaluate the severity of each control deficiency identified by internal audit to determine whether the deficiency individually or in combination with other deficiencies constituted a material weakness. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 |
Issuer B2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The firm's approach for substantively testing revenue and related accounts was to review and test management's process. The following deficiencies were identified: - The firm did not perform sufficient procedures to evaluate the reasonableness of the assumptions used by the issuer to estimate revenue and related accounts because its procedures were limited to reading the memorandum prepared by the issuer and comparing certain assumptions to those used by the issuer in the previous year. (AS 2501.16) Financial statement audit only | AS 2501.16 | |
| 2 | Revenue and Related Accounts | The firm's approach for substantively testing revenue and related accounts was to review and test management's process. The following deficiencies were identified: - The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of certain disaggregated information generated from the issuer's system and used to estimate revenue and related accounts. (AS 1105.10) Financial statement audit only | AS 1105.10 |
Issuer C2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer's ALL included a general reserve which consisted primarily of a qualitative component. The firm's approach for substantively testing the ALL was to review and test management's process. The following deficiencies were identified: - The firm did not perform sufficient procedures to evaluate the reasonableness of certain assumptions used by the issuer to develop the qualitative component of the general reserve ('qualitative reserve') because the firm did not evaluate whether the issuer had a reasonable basis for the assumptions. (AS 2501.16) Financial statement audit only | AS 2501.16 | |
| 2 | Allowance for Credit/Loan Losses | The issuer's ALL included a general reserve which consisted primarily of a qualitative component. The firm's approach for substantively testing the ALL was to review and test management's process. The following deficiencies were identified: - The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of certain historical loss information generated from the issuer's system and used to develop a portion of the qualitative reserve. (AS 1105.10) Financial statement audit only | AS 1105.10 |
Issuer D1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer's ALL included a general reserve which consisted of quantitative and qualitative components. The firm selected for testing a control that consisted of the issuer's review of the underlying data and primary calculations supporting an ALL analysis designed to assess the appropriateness of the quantitative and qualitative adjustments. The firm did not evaluate the specific review procedures that the control owner performed to (1) assess the appropriateness of the adjustments and (2) verify the accuracy and completeness of the data used in determining certain of the adjustments. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 |
Issuer E1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Participant Distributions | The issuer used a service organization to process and record participant distributions. The firm's approach to substantively test participant distributions included reliance on controls including controls over the accuracy and completeness of certain information obtained from the service organization related to participant distributions. The firm did not perform any procedures to identify and test the operating effectiveness of complimentary user controls in place at the issuer related to participant distributions. (AS 2601.14) Financial statement audit only | AS 2601.14 |