- Inspection year
- 2022
- Report date
- 14-Sep-2023
- PCAOB release
- 104-2023-167
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 3
- Part I.A deficiency rate
- 100%
- Part I.A deficiencies
- 26
- Part I.B deficiencies
- 8
- Report
- View PDF ↗
Deficiencies (26)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A19 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Related Party Transactions | During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not evaluate whether the terms and other information about the transactions were consistent with inquiries and other audit evidence about the business purpose (or lack thereof) of the transactions. (AS 2410.12a) Financial statement audit only | AS 2410.12a | Incorrect opinion |
| 2 | Related Party Transactions | During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not evaluate whether the business purpose (or lack thereof) indicated that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.67) Financial statement audit only | AS 2401.67 | Incorrect opinion |
| 3 | Related Party Transactions | During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not perform any procedures to determine whether the issuer had ownership of or other rights to sell the software to Related Party B. (AS 2301.08; AS 2410.11) Financial statement audit only | AS 2301.8; AS 2410.11 | Incorrect opinion |
| 4 | Related Party Transactions | During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not perform any procedures to evaluate the financial capability of Related Party B with respect to the loan receivable. (AS 2410.12d) Financial statement audit only | AS 2410.12d | Incorrect opinion |
| 5 | Related Party Transactions | During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not perform any procedures to determine whether the debt cancellation in the Subsequent Transaction had been previously cancelled under the Settlement Agreement. (AS 2301.08; AS 2410.11) Financial statement audit only | AS 2301.8; AS 2410.11 | Incorrect opinion |
| 6 | Related Party Transactions | During the prior year the issuer sold certain assets to Related Party A in return for the cancellation of debt. In addition in the prior year Related Party A transferred these assets to another related party ('Related Party C') as settlement of debt. During the current year the issuer repurchased these assets from Related Party C for the issuance of preferred shares which were recorded as an expense. The issuer did not assign a book value to these assets. The following deficiency was identified: · The firm did not evaluate whether the terms and other information about the transaction were consistent with inquiries and other audit evidence about the business purpose (or lack thereof) of the transactions. (AS 2410.12a) Financial statement audit only | AS 2410.12a | Incorrect opinion |
| 7 | Related Party Transactions | During the prior year the issuer sold certain assets to Related Party A in return for the cancellation of debt. In addition in the prior year Related Party A transferred these assets to another related party ('Related Party C') as settlement of debt. During the current year the issuer repurchased these assets from Related Party C for the issuance of preferred shares which were recorded as an expense. The issuer did not assign a book value to these assets. The following deficiency was identified: · The firm did not evaluate whether the business purpose (or lack thereof) indicated that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.67) Financial statement audit only | AS 2401.67 | Incorrect opinion |
| 8 | Related Party Transactions | During the prior year the issuer sold certain assets to Related Party A in return for the cancellation of debt. In addition in the prior year Related Party A transferred these assets to another related party ('Related Party C') as settlement of debt. During the current year the issuer repurchased these assets from Related Party C for the issuance of preferred shares which were recorded as an expense. The issuer did not assign a book value to these assets. The following deficiency was identified: · The firm did not perform any procedures to test the existence and valuation of the acquired assets. (AS 2301.08; AS 2410.11) Financial statement audit only | AS 2301.8; AS 2410.11 | Incorrect opinion |
| 9 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not perform any substantive procedures to establish that the issuer had control over these other assets to support its rights and obligations. (AS 2301.08 and .11; AS 2410.11) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 2301.8; AS 2301.11; AS 2410.11 | Significant riskIncorrect opinion |
| 10 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate the reliability of information from a related party and data from an external provider that it used to test the existence of these other assets. (AS 1105.04 and .06) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 1105.4; AS 1105.6 | Significant riskIncorrect opinion |
| 11 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate the reliability of pricing information that it used to test the valuation of these other assets. (AS 1105.04 and .06) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 1105.4; AS 1105.6 | Significant riskIncorrect opinion |
| 12 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not identify and evaluate a GAAP departure related to the issuer presenting Other Assets B as indefinite lived intangible assets while also carrying them at fair value. (AS 2810.30) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 2810.30 | Significant riskIncorrect opinion |
| 13 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not evaluate whether the issuer's accounting for its other assets as (1) intangible assets and (2) as current or non-current assets was appropriate and in conformity with GAAP. (AS 2301.08 and .11) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 2301.8; AS 2301.11 | Significant riskIncorrect opinion |
| 14 | Other Assets | During the year the issuer acquired other assets from Related Party B ('Other Assets A') and recorded them as non-current intangible assets. The issuer subsequently disposed of the majority of Other Assets A in exchange primarily for the settlement of related party debt. The issuer presented this disposal as revenue and cost of sales. In addition the issuer acquired additional other assets ('Other Assets B') from a customer for services rendered and recorded them as current intangible assets. The following deficiency was identified: · The firm did not evaluate whether the issuer's recording of revenue for the transfer of Other Assets A to a related party qualified as a transaction with a customer in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2410.17; AS 2810.03) In connection with our review the issuer reevaluated the accounting for the transfer of Other Assets A as revenue and cost of sales and determined that a misstatement existed that had not been previously identified. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this misstatement in a subsequent filing by revising the accounting. Financial statement audit only | AS 2410.17; AS 2810.3 | Significant riskIncorrect opinion |
| 15 | Preferred Shares | During the year the issuer issued preferred shares and recorded them within stockholder's equity. The firm did not evaluate whether the issuer's accounting for and presentation of the issuance of these preferred shares was in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity and FASB ASC Topic 820 Fair Value Measurement. (AS 2301.08) Financial statement audit only | AS 2301.8 | Incorrect opinion |
| 16 | Preferred Shares | The issuer engaged an external specialist to determine the fair value of the preferred shares. The following deficiency was identified: · The firm did not evaluate the reasonableness of the significant assumptions developed by the company's specialist. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b | Incorrect opinion |
| 17 | Preferred Shares | The issuer engaged an external specialist to determine the fair value of the preferred shares. The following deficiency was identified: · The firm did not evaluate the appropriateness of the methods the company's specialist used to determine the fair value. (AS 1105.A8c) Financial statement audit only | AS 1105.A8c | Incorrect opinion |
| 18 | Preferred Shares | The issuer engaged an external specialist to determine the fair value of the preferred shares. The following deficiency was identified: · The firm did not identify and evaluate the effect on the fair value determination of certain inconsistencies related to the rights of the preferred shares between the company's specialist report the disclosures in the financial statements and the issuer's Amended Articles of Incorporation. (AS 1105.A9c and .A10) Financial statement audit only | AS 1105.A10; AS 1105.A9c | Incorrect opinion |
| 19 | Preferred Shares | The firm did not perform any procedures to test the issuer's financial statement disclosures regarding certain of the rights related to the preferred shares including consideration of the differences between the company's specialist's report the disclosures and the issuer's Amended Articles of Incorporation. (AS 2301.08; AS 2810.03) Financial statement audit only | AS 2301.8; AS 2810.3 | Incorrect opinion |
Issuer B5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Debt | During the year the issuer issued convertible notes with warrants. The issuer engaged an external specialist to determine the standalone fair values of the convertible notes and warrants to determine the allocation of proceeds and recording of debt and equity associated with the transaction. The following deficiency was identified: · The firm did not evaluate whether the issuer's accounting for the convertible notes was in conformity with GAAP including whether (1) the conversion options should have been bifurcated and accounted for as derivatives in conformity with FASB ASC Topic 815 Derivatives and Hedging or (2) the convertible notes should have been separated into a liability component and the embedded conversion option in conformity with FASB ASC Topic 470 Debt. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Debt | During the year the issuer issued convertible notes with warrants. The issuer engaged an external specialist to determine the standalone fair values of the convertible notes and warrants to determine the allocation of proceeds and recording of debt and equity associated with the transaction. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of the significant assumptions developed by the company's specialist to determine the fair values of the convertible notes and warrants. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b | |
| 3 | Debt | During the year the issuer issued convertible notes with warrants. The issuer engaged an external specialist to determine the standalone fair values of the convertible notes and warrants to determine the allocation of proceeds and recording of debt and equity associated with the transaction. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate whether the method used by the company's specialist to determine the fair values of the convertible notes and warrants was appropriate in the circumstances taking into account the requirements of the applicable financial reporting framework. (AS 1105.A8c) Financial statement audit only | AS 1105.A8c | |
| 4 | Debt | Subsequent to the issuance of the convertible notes with warrants the issuer also issued shares of common stock to the noteholder. The following deficiency was identified: · The firm did not perform substantive procedures beyond obtaining a copy of the securities purchase agreement to test the issuance of the shares to the noteholder. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 5 | Debt | Subsequent to the issuance of the convertible notes with warrants the issuer also issued shares of common stock to the noteholder. The following deficiency was identified: · The firm did not evaluate an apparent discrepancy between the statement of stockholders' equity and the issuer's footnote disclosures regarding the issuance of these shares. (AS 2301.08) Financial statement audit only | AS 2301.8 |
Issuer C2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Other Assets | During the year the issuer changed the accounting and presentation of an asset from one asset class to another. The firm did not perform procedures to evaluate whether this change was appropriate including consideration of contrary evidence that indicated that the asset may not have met the criteria for the new classification. (AS 2301.08 and .11; AS 2810.03) Financial statement audit only | AS 2301.8; AS 2301.11; AS 2810.3 | Significant risk |
| 2 | Other Assets | During the year the issuer changed the accounting and presentation of an asset from one asset class to another. The firm did not perform procedures to evaluate whether this change in classification was appropriately presented and disclosed in conformity with FASB ASC Topic 205 Presentation of Financial Statements. (AS 2301.08 and .11) Financial statement audit only | AS 2301.8; AS 2301.11 | Significant risk |