- Inspection year
- 2022
- Report date
- 26-Oct-2023
- PCAOB release
- 104-2023-195
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 2
- Part I.A deficiency rate
- 67%
- Part I.A deficiencies
- 10
- Part I.B deficiencies
- 4
- 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 A5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For four locations the firm did not perform sufficient procedures to test the automated control because the firm did not (1) evaluate whether the control was configurable or programmable within the system and (2) perform procedures to test the configuration or program of the control as applicable. Further the firm did not test each relevant scenario of the automated control to ensure the system processed transactions as designed. (AS 2201.42 and 44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Accounts Receivable | The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For four locations the firm did not perform any procedures to test the manual element of the control when cash receipts were not automatically applied. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Accounts Receivable | The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For one location the firm did not identify and test any controls that addressed whether cash receipts were matched to corresponding invoices and applied to the correct accounts receivable balances. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Accounts Receivable | The firm's procedures to test the existence and valuation of accounts receivable at these five locations included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures and placing reliance on controls. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the firm's other substantive procedures did not provide the level of substantive evidence needed to support its sampling approach (AS 2315.16 .19 .23 and .23A). Both financial statement and ICFR audits | AS 2315.16; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 5 | Accounts Receivable | The firm's procedures to test the existence and valuation of accounts receivable at these five locations included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures and placing reliance on controls. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the procedures performed to test accounts receivable were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's testing discussed above. (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 |
Issuer B5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing a control over revenue that consisted of management's review of a selection of customer contracts including their respective contractual terms. The firm did not sufficiently evaluate the specific review procedures that the control owner performed to review the contractual terms of the selected contracts because the firm's procedures were limited to management's review of only one term within the contracts. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing a control over revenue that consisted of management's review of a selection of customer contracts including their respective contractual terms. The firm identified deviations in the operation of this control but did not determine the effect of these deviations on the operating effectiveness of the control. (AS 2201.48) Both financial statement and ICFR audits | AS 2201.48 | |
| 3 | Revenue | The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm did not identify and test any controls over the entry of contract information including contractual terms into the accounting system that were used to recognize revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue | The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing another control over revenue that consisted of management's review of credit notes. The firm identified deviations in the operation of this control but did not determine the effect of these deviations on the operating effectiveness of the control. (AS 2201.48) Both financial statement and ICFR audits | AS 2201.48 | |
| 5 | Accounts Receivable | The firm's procedures to test the existence and valuation of accounts receivable included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the firm's other substantive procedures did not provide the level of substantive evidence needed to support its sampling approach. (AS 2315.16 .19 .23 and .23A) Both financial statement and ICFR audits | AS 2315.16; AS 2315.19; AS 2315.23; AS 2315.23A |