- Inspection year
- 2022
- Report date
- 28-Nov-2023
- PCAOB release
- 104-2024-031
- Audits reviewed
- 29
- Audits w/ Part I.A deficiencies
- 19
- Part I.A deficiency rate
- 66%
- Part I.A deficiencies
- 128
- Part I.B deficiencies
- 9
- Report
- View PDF ↗
Deficiencies (128)
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 | Expenses | For one contractual arrangement the firm did not sufficiently evaluate whether the issuer's accounting for certain payments to a customer as expenses was in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers because it did not evaluate whether these payments included variable consideration. (AS 2301.08) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that misstatements existed that had not been previously identified. The issuer subsequently corrected these misstatements in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. Financial statement audit only | AS 2301.8 | Incorrect opinion |
| 2 | Expenses | For a second contractual arrangement the firm did not evaluate whether the issuer's upfront recording of an advance cash payment for advertising services as an operating expense was in conformity with FASB ASC Topic 720 Other Expenses. (AS 2301.08) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that misstatements existed that had not been previously identified. The issuer subsequently corrected these misstatements in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. Financial statement audit only | AS 2301.8 | Incorrect opinion |
| 3 | Expenses | For the second contractual arrangement the issuer also issued equity awards for advertising services. The firm did not evaluate whether the issuer in conformity with FASB ASC Topic 718 Stock Compensation should have deferred and recognized these awards in the same manner as if the issuer had paid cash for these services. (AS 2301.08) Financial statement audit only | AS 2301.8 | Incorrect opinion |
| 4 | Expenses | The firm did not sufficiently test expenses because when planning its sample for its test of details the firm did not consider the characteristics of the population. (AS 2315.16 .23 and .23A) Financial statement audit only | AS 2315.16; AS 2315.23; AS 2315.23A | Incorrect opinion |
| 5 | Expenses | When testing the sample the firm selected the firm identified misstatements but did not (1) evaluate the nature and cause of the misstatements identified (2) project the misstatements to the remaining population of expenses and (3) evaluate whether the projected misstatements were material to the financial statements. (AS 2315.26 and .27; AS 2810.17) Financial statement audit only | AS 2315.26; AS 2315.27; AS 2810.17 | Incorrect opinion |
Issuer B16 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deferred Revenue | The issuer used certain information technology (IT) systems to initiate process and/or record transactions related to revenue unbilled accounts receivable deferred revenue and inventory. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. As a result of the deficiencies in the firm's testing of IT general controls (ITGCs) the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Deferred Revenue | With respect to change management: · The firm selected for testing a control over the segregation of duties related to the ability to develop and implement changes to these IT systems. In its testing of the operating effectiveness of this control the firm did not test whether users with the ability to implement changes also had the ability to develop changes. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 3 | Deferred Revenue | With respect to change management: · The firm selected for testing certain controls over change management for these IT systems but did not perform sufficient procedures to test the completeness of the population of changes from which it made its selections for testing because it limited its procedures to testing the completeness of only one type of change. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 4 | Deferred Revenue | With respect to user access: · The firm selected for testing certain controls over the restriction of access to these IT systems. In its testing of the operating effectiveness of one of these controls the firm excluded a certain type of user from its testing population. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 5 | Deferred Revenue | With respect to user access: · The firm selected for testing certain controls over the restriction of access to these IT systems. In its testing of the operating effectiveness of one of these controls the firm did not evaluate whether access was appropriately restricted beyond inquiring of management. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | Deferred Revenue | With respect to user access: · The firm selected for testing a control over the issuer's review of requested user access to these IT systems. In its testing of the operating effectiveness of this control the firm excluded a certain type of user from its testing population and instead replaced one of the users selected with one of the excluded type of users. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 7 | Deferred Revenue | With respect to user access: · The firm selected for testing a control over the issuer's periodic review of previously granted access to these IT systems. In its testing of operating effectiveness the firm did not test beyond inquiry the aspect of the control that addressed the accuracy and completeness of the reports used in the operation of the control. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 8 | Deferred Revenue | As a result of the firm's ITGC testing deficiencies for revenue unbilled accounts receivable and deferred revenue the firm did not perform sufficient procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data or reports the firm used (1) to make its selections to test certain controls or (2) in its substantive testing. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 9 | Deferred Revenue | The firm selected for testing automated controls over the timing of revenue recognition the approval of sales discounts and the calculation of contract progress. The firm did not sufficiently test the design and operating effectiveness of these automated controls as it limited its testing to only certain scenarios without identifying and/or evaluating all relevant configurations. Further for one of these controls the firm tested an aspect of this control in the issuer's IT testing environment rather than in its production environment without performing any procedures to determine whether the testing environment was a complete replica of the production environment. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 10 | Deferred Revenue | Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The firm did not perform any substantive procedures to evaluate the reasonableness of the standalone selling prices that the issuer established. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 11 | Inventory | The firm selected for testing certain controls related to the issuer's review of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over certain inputs used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 12 | Inventory | The firm selected for testing automated controls over the recording of inventory upon receipt. The firm did not sufficiently test the design and operating effectiveness of these automated controls as it limited its testing to only certain scenarios without identifying and evaluating all relevant configurations. Further the firm tested these controls in the issuer's IT testing environment rather than in its production environment without performing any procedures to determine whether the testing environment was a complete replica of the production environment. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 13 | Inventory | The firm selected for testing an automated control over the timing and amount of cost of sales recognized. The firm did not test whether cost of sales was recognized (1) upon revenue recognition and (2) at standard cost. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 14 | Income Taxes | The firm selected for testing certain controls that consisted of the issuer's review of the income tax provision transfer-pricing reserves uncertain tax positions and tax disclosures. The firm did not evaluate the review procedures that the control owner 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 | Significant risk |
| 15 | Income Taxes | The firm did not identify and test any controls related to the issuer's evaluation of the potential effects of changes in tax rates tax laws and accounting standards. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 16 | Income Taxes | The firm did not perform any procedures to test or test any controls over the accuracy and completeness of certain information produced by the issuer that the firm used in its substantive testing of the income tax provision. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
Issuer C16 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The issuer used several IT systems to initiate process and/or record transactions related to one type of revenue and the related accounts receivable. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by these IT systems. As a result of the deficiencies in the firm's testing of ITGCs the firm's testing of these IT-dependent manual controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Accounts Receivable | The firm identified significant deficiencies in ITGCs for two of the issuer's IT systems related to individuals having inappropriate access to these systems. The firm identified and tested various compensating controls that it believed would mitigate these deficiencies. In performing its testing of the identified compensating controls the firm did not identify that the control owners used data and reports in the performance of these controls that were produced by the systems that were subject to these ITGC deficiencies. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 3 | Accounts Receivable | For another IT system the firm did not identify and test any controls that addressed the risk that inappropriate changes could be made to the reports maintained in this system. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Accounts Receivable | As a result of the firm's control testing deficiencies the firm did not perform sufficient procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data and reports it used in its substantive testing for this revenue and the related accounts receivable. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 5 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · For one business unit the firm selected for testing a control that included the issuer's review of changes to prices in the issuer's IT system for existing customers. The firm did not evaluate the specific review procedures that the control owner performed to assess the accuracy of these price changes. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · The firm did not identify and test any controls that addressed whether the issuer was acting as a principal or an agent in these arrangements. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · The issuer used point-of-sale systems to accumulate and transmit transaction data to certain of the issuer's IT systems and recorded revenue based on these data. The firm did not identify and test any controls that addressed the accuracy and completeness of these data. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · The firm's substantive procedures to test this revenue included testing a sample of revenue transactions. For the transactions selected for testing the firm did not evaluate whether the issuer was acting as a principal or as an agent for this revenue. (AS 2301.08 and .13) Both financial statement and ICFR audits | AS 2301.8; AS 2301.13 | |
| 9 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · The firm used transaction data from the issuer's point-of-sale systems in its substantive testing. For one business unit the firm did not sufficiently test the accuracy and completeness of these data because the firm (1) did not select its sample from the full population and (2) for most of its selections limited its procedures to comparing the data to reports generated from the same transmitted data. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 10 | Revenue | For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · The firm used transaction data from the issuer's point-of-sale systems in its substantive testing. For one business unit the firm did not perform any procedures to test or identify and test any controls over the accuracy and completeness of these data. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 11 | Revenue | For two types of revenue one of which was affected by other audit deficiencies certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The following additional deficiencies were identified: · The firm did not identify and test any controls that addressed the estimate of the standalone selling prices of the performance obligations. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 12 | Revenue | For two types of revenue one of which was affected by other audit deficiencies certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The following additional deficiencies were identified: · For certain contracts the firm did not identify and test any controls that addressed whether the allocation of the transaction price to the separate performance obligations was based on the standalone selling prices. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 13 | Revenue | For two types of revenue one of which was affected by other audit deficiencies certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The following additional deficiencies were identified: · The firm did not evaluate whether the methods that the issuer used to estimate the standalone selling prices were in conformity with FASB ASC Topic 606 because the firm did not evaluate whether the issuer's methods maximized the use of observable inputs. (AS 2501.10) Both financial statement and ICFR audits | AS 2501.10 | |
| 14 | Revenue | For two types of revenue one of which was affected by other audit deficiencies certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The following additional deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the completeness of the information the issuer used to estimate the standalone selling prices. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 15 | Revenue | For two types of revenue one of which was affected by other audit deficiencies certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The following additional deficiencies were identified: · For certain contracts the firm did not perform any substantive procedures to test whether the allocation of the transaction price was based on standalone selling prices. (AS 2301.08 and .13) Both financial statement and ICFR audits | AS 2301.8; AS 2301.13 | |
| 16 | Accounts Receivable | The firm selected for testing a control over the issuer's review of the accounting treatment for one-time or unusual transactions. The firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness of the conclusions reached regarding the accounting treatment. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 |
Issuer D12 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | For one type of revenue the firm selected for testing controls that consisted of the issuer's review of (1) invoices and revenue journal entries and (2) the related accounts receivable reconciliation. The firm did not identify and test any controls over the accuracy and completeness of certain reports that were used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Accounts Receivable | The following deficiencies were identified for another type of revenue: · The firm did not identify and test any controls that addressed whether the performance obligation was satisfied before revenue was recognized. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Accounts Receivable | The following deficiencies were identified for another type of revenue: · The firm did not perform any substantive procedures to test (1) whether the performance obligation was satisfied before revenue was recognized and (2) the completeness of this revenue for the first three quarters of the year. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 4 | Accounts Receivable | The sample sizes the firm used in its substantive procedures to test certain revenue and 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 the deficiencies in the firm's control 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 | |
| 5 | Goodwill | The issuer engaged a specialist to perform an assessment of goodwill and certain intangible assets for possible impairment. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the (1) reasonableness of a significant assumption developed by the company's specialist and (2) relevance and reliability of certain external information used by the company's specialist in developing another significant assumption. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over goodwill and these intangible assets and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report. Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Goodwill | The issuer engaged a specialist to perform an assessment of goodwill and certain intangible assets for possible impairment. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of certain other significant assumptions developed by the company's specialist or developed by the issuer. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these significant assumptions. (AS 2201.42 and .44) Unrelated to our review the issuer reevaluated its controls over goodwill and these intangible assets and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report. Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Intangible Assets | The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not evaluate the reasonableness of certain significant assumptions developed by the company's specialist or developed by the issuer. (AS 1105.A8b; AS 2501.16) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing. Both financial statement and ICFR audits | AS 1105.A8b; AS 2501.16 | |
| 8 | Intangible Assets | The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain other significant assumptions developed by the company's specialist because it did not evaluate whether these assumptions were consistent with existing market information. (AS 1105.A8b) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing. Both financial statement and ICFR audits | AS 1105.A8b | |
| 9 | Intangible Assets | The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of certain external information used by the company's specialist in developing another significant assumption. (AS 1105.A8a) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing. Both financial statement and ICFR audits | AS 1105.A8b | |
| 10 | Debt | During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm did not identify and test any controls that addressed whether the (1) restructured debt and (2) issuer's fair value disclosures for debt were measured in conformity with FASB ASC Topic 820 Fair Value Measurement. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 11 | Debt | During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm's approach to substantively test the fair value of the restructured debt was to develop an independent expectation of the estimate. In developing its expectation the firm did not take into account certain requirements of FASB ASC Topic 820. (AS 2501.21) Both financial statement and ICFR audits | AS 2501.21 | |
| 12 | Debt | During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm did not perform any procedures to test the issuer's fair value disclosures for debt. (AS 2501.07) Both financial statement and ICFR audits | AS 2501.7 |
Issuer E15 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. The firm did not identify and test controls that addressed whether the level of access provided to users was appropriate. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Inventory | The issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. As a result of the deficiency in the firm's testing of ITGCs the firm's testing of these IT-dependent manual controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 3 | Inventory | The firm selected for testing certain controls that consisted of the issuer's review of the (1) allocation of labor and overhead costs to inventory and (2) reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Inventory | The firm selected for testing a control that consisted of the issuer's review of standard costing for inventory items with cost increases. In evaluating the design of this control the firm did not assess the effect of the issuer excluding decreases in costs 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 | |
| 5 | Inventory | The firm selected for testing a control that consisted of the automated recording of inventory at standard cost and the issuer's review of variances between actual and standard costs. The firm did not test the automated aspect of this control. Further the firm did not evaluate the review procedures that the control owner performed related to the review of variances 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 | |
| 6 | Inventory | The firm selected for testing a control that consisted of the issuer's review of the classification of inventory between raw materials work-in-process and finished goods. The firm did not evaluate the review procedures that the control owner 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 | |
| 7 | Inventory | The firm did not perform procedures to test or test any controls over the completeness of a system-generated report that the firm used (1) to make its selections to test a control over the recording of inventory upon receipt and (2) in its substantive testing of inventory cut-off. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 8 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the issuer which were also used by the firm in developing its independent expectations. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Significant risk |
| 9 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not test or test any controls over the accuracy and/or completeness of certain data produced by the issuer and used by the firm in developing its independent expectations. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
| 10 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived. (AS 2501.22) Both financial statement and ICFR audits | AS 2501.22 | Significant risk |
| 11 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For two of the acquired intangible assets the firm did not perform sufficient procedures to demonstrate it had a reasonable basis for an assumption it independently derived because the data it used to develop this assumption included unrelated data. (AS 2501.22) Both financial statement and ICFR audits | AS 2501.22 | Significant risk |
| 12 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For two of the acquired intangible assets the firm did not evaluate the relevance of certain external data it used to develop its independent expectations. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 | Significant risk |
| 13 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For one of the acquired intangible assets the firm used an auditor-employed specialist to evaluate a significant assumption developed by the company's specialist which the firm used in developing its independent expectation of this estimate. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because it did not evaluate the (1) relevance and reliability of external data that the company's specialist used to develop this assumption and (2) reasonableness of this assumption. (AS 1105.A8a and .A8b; AS 1201.C6 and .C7) Both financial statement and ICFR audits | AS 1105.A8a; AS 1105.A8b; AS 1201.C6; AS 1201.C7 | Significant risk |
| 14 | Business Combinations | The firm did not evaluate whether in conformity with FASB ASC Topic 805 Business Combinations a separately identifiable intangible asset existed related to an agreement that was executed as part of the acquisition. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | Significant risk |
| 15 | Business Combinations | The firm's approach for substantively testing the fair value of the contingent consideration to be paid to the sellers was to review and test the issuer's process. The firm's approach for evaluating the reasonableness of certain of the issuer's assumptions was to develop independent expectations of those assumptions. The firm did not compare the issuer's assumptions to these independent expectations which were affected by the audit deficiencies discussed above. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Significant risk |
Issuer F16 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The issuer recognized certain revenue from one of its business units over time based on units completed to date relative to total contractual units. The firm did not identify and test any controls that addressed whether certain requirements of FASB ASC Topic 606 had been met in determining revenue recognition. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 2 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The firm did not perform sufficient substantive procedures to evaluate whether certain of this revenue was appropriately recognized because the firm only reviewed one customer change order. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | Significant risk |
| 3 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm did not identify and test any controls that addressed the accuracy of this revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 4 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue journal entries and related support. The firm did not evaluate the review procedures that the control owner 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 | Significant risk |
| 5 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue journal entries and related support. The firm did not test the aspect of this control that addressed the accuracy and completeness of certain information used to record revenue. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 6 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of contract setup within the issuer's IT system. The firm did not test the aspect of this control that addressed the accuracy of contractual units and rates. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 7 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm did not perform any procedures to test the completeness of this revenue. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | Significant risk |
| 8 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue recognition for certain contracts. 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 | Significant risk |
| 9 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue recognition for modified contracts. The firm did not test the design of the aspects of this control related to unapproved contract modifications. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | Significant risk |
| 10 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm did not perform procedures to evaluate whether unapproved contract modifications were accounted for in conformity with FASB ASC Topic 606. (AS 2301.08 and .11) Both financial statement and ICFR audits | AS 2301.8; AS 2301.11 | Significant risk |
| 11 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The issuer engaged a specialist to assist it in estimating the amount of revenue to be recognized from certain unapproved contract modifications using various significant assumptions. The firm did not (1) evaluate the reasonableness of the significant assumptions developed by the company's specialist or by the issuer (2) test the accuracy and completeness of information produced by the issuer that was used by the company's specialist and (3) evaluate whether the methods used by the company's specialist were appropriate under the circumstances. (AS 1105.A8a-c; AS 2501.16) Both financial statement and ICFR audits | AS 1105.A8a; AS 1105.A8b; AS 1105.A8c; AS 2501.16 | Significant risk |
| 12 | Revenue and Related Accounts | The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The firm selected for testing controls that consisted of the issuer's reviews of allowances for accounts related to certain revenue. The firm did not identify and test any controls over the accuracy of certain reports used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 13 | Revenue and Related Accounts | The sample sizes the firm used in its substantive procedures to test certain revenue and related accounts 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 the deficiencies in the firm's control 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 | Significant risk |
| 14 | Debt | The firm did not identify and test any controls that addressed whether the issuer's fair value disclosures for certain debt were measured in conformity with FASB ASC Topic 820. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 15 | Debt | The firm did not perform any substantive procedures to test the issuer's fair value disclosures for this debt. (AS 2501.07) Both financial statement and ICFR audits | AS 2501.7 | |
| 16 | Debt | The firm did not identify and evaluate the issuer's omission of a required disclosure under FASB ASC Topic 820 related to the categorization of certain of this debt within the fair value hierarchy. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its disclosure related to this debt and determined that a disclosure was omitted. The issuer did not file an amended Form 10-K or Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this omission in a subsequent filing. Both financial statement and ICFR audits | AS 2810.30; AS 2810.31 |
Issuer G9 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For one type of revenue the firm selected for testing various automated controls over the processing of certain orders through the issuer's IT systems. The firm's testing of each of these automated controls using a sample of only one instance of the control's operation was not sufficient because the firm did not test whether changes to configurations within these controls were subject to effective ITGCs over these IT systems. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Accounts Receivable | For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For a second type of revenue the firm selected for testing a control that included the issuer's evaluation of whether delivery and installation were a single performance obligation. The firm did not test this aspect of the control. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Accounts Receivable | For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For a second type of revenue the firm selected for testing a control that included the issuer's evaluation of whether delivery and installation were a single performance obligation. The firm did not identify and test any controls that addressed the risk that other performance obligations existed that would affect whether revenue was appropriately recognized. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Accounts Receivable | For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For both types of revenue the firm did not identify and test any controls that addressed whether the quantities the issuer invoiced represented the quantities ordered by the customers. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Accounts Receivable | For another business unit the firm selected for testing a control over the transfer of data from the revenue system to the general ledger. The firm did not test the automated aspect of this control that addressed the completeness of the data transferred. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | Accounts Receivable | The sample sizes the firm used in certain of its substantive procedures to test revenue and 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 the deficiencies in the firm's control 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 | |
| 7 | Equity | The firm selected for testing a control that consisted of the issuer's review of the fair value measurements of redeemable noncontrolling interests. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the reasonableness of the earnings multiples used in determining the fair values. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 8 | Equity | The firm selected for testing a control that consisted of the issuer's review of the fair value measurements of redeemable noncontrolling interests. The firm did not identify and test any controls over the accuracy and completeness of the historical earnings multiples that the control owner used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 9 | Equity | The firm identified the issuer's omission of a required disclosure under FASB ASC Topic 820 related to the earnings multiples used in the fair value measurements of redeemable noncontrolling interests. The firm did not sufficiently evaluate the effect of this omission because it limited its assessment to asserting that including the omitted disclosure would not change a financial statement user's decision. (AS 2810.17 .30 and .31) Both financial statement and ICFR audits | AS 2810.17; AS 2810.30; AS 2810.31 |
Issuer H9 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to assist in determining the fair values of certain acquired assets and the related liabilities as of the acquisition date using various significant assumptions. This specialist also assisted the issuer in determining the fair values at year end. The following deficiencies were identified: · In evaluating the company's specialist's methods to determine these fair values as of the acquisition date the firm selected a sample of assets to evaluate whether the data and significant assumptions were appropriately applied. The firm's sample was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement and the allowable risk of incorrect acceptance. (AS 1105.A8c; AS 2315.16 .23 and .23A) Financial statement audit only | AS 1105.A8c; AS 2315.16; AS 2315.23; AS 2315.23A | |
| 2 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to assist in determining the fair values of certain acquired assets and the related liabilities as of the acquisition date using various significant assumptions. This specialist also assisted the issuer in determining the fair values at year end. The following deficiencies were identified: · In evaluating the company's specialist's methods to determine these fair values as of the acquisition date the firm selected a sample of assets to evaluate whether the data and significant assumptions were appropriately applied. For one category of these assets the firm did not evaluate whether the data and significant assumptions were appropriately applied to the complete population of these assets. (AS 1105.A8c) Financial statement audit only | AS 1105.A8c | |
| 3 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to assist in determining the fair values of certain acquired assets and the related liabilities as of the acquisition date using various significant assumptions. This specialist also assisted the issuer in determining the fair values at year end. The following deficiencies were identified: · For these acquired assets and the related liabilities as of the acquisition date the firm did not perform procedures to evaluate the reasonableness of certain significant assumptions developed by the company's specialist beyond comparing these assumptions to assumptions the issuer used in the prior year. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b | |
| 4 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to assist in determining the fair values of certain acquired assets and the related liabilities as of the acquisition date using various significant assumptions. This specialist also assisted the issuer in determining the fair values at year end. The following deficiencies were identified: · The issuer used a service organization to process and record transactions related to certain of these assets and the related liabilities which was the source of certain data used by the company's specialist. The firm's approach to testing these data upon acquisition and year end included reliance on controls at the service organization. The firm did not perform procedures to test or test the operating effectiveness of certain complimentary user controls over these data that were identified in the service auditor's report. (AS 1105.A8a; AS 2601.14) Financial statement audit only | AS 1105.A8a; AS 2601.14 | |
| 5 | Business Combinations | For a sample of certain acquired assets as of the acquisition date and at year end the firm sent positive confirmation requests. For the confirmations that were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the recorded amounts were accurate as of the confirmation date. (AS 2310.31) Financial statement audit only | AS 2310.31 | |
| 6 | Business Combinations | The firm used an auditor-engaged specialist to assist it with testing the fair values of certain assets and the related liabilities at year end which were determined by one of the company's specialists. The following deficiencies were identified: · The firm did not identify that the auditor-engaged specialist did not perform any procedures to evaluate the (1) reasonableness of significant assumptions developed by the company's specialist or by the issuer and (2) relevance and reliability of certain external data used by the company's specialist. (AS 1105.A8a and .A8b; AS 1210.09 and .12; AS 2501.16) Financial statement audit only | AS 1105.A8a; AS 1105.A8b; AS 1210.9; AS 1210.12; AS 2501.16 | |
| 7 | Business Combinations | The firm used an auditor-engaged specialist to assist it with testing the fair values of certain assets and the related liabilities at year end which were determined by one of the company's specialists. The following deficiencies were identified: · The firm did not perform any procedures to test the accuracy or completeness of certain issuer-produced data used by the issuer to estimate the discount rates that the company's specialist used to estimate the fair values of one category of these assets and the related liabilities. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 8 | Business Combinations | The firm used an auditor-engaged specialist to assist it with testing the fair values of certain assets and the related liabilities at year end which were determined by one of the company's specialists. The following deficiencies were identified: · The firm did not sufficiently evaluate the appropriateness of the methods used by the company's specialist for this category of these assets and the related liabilities because it did not evaluate whether certain other information used was relevant to the estimate. (AS 1105.A8c) Financial statement audit only | AS 1105.A8c | |
| 9 | Business Combinations | During the year the issuer acquired two businesses. The firm did not perform any procedures to evaluate the reasonableness of certain significant issuer-developed assumptions that were used by another of the company's specialists to determine the fair values of acquired intangible assets as of the acquisition date and at year end. (AS 2501.16) Financial statement audit only | AS 2501.16 | Significant risk |
Issuer I6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm used system-generated data and reports in its testing of revenue. The following deficiencies were identified: · The extent of the firm's procedures to test the accuracy of certain of these system-generated reports was not sufficient because when calculating its sample size the firm did not take into account an identified significant deficiency over ITGCs for this system. (AS 1105.10) Financial statement audit only | AS 1105.10 | Significant risk |
| 2 | Revenue | The firm used system-generated data and reports in its testing of revenue. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the accuracy and/or completeness of one of these reports and certain other system-generated data certain of which the firm used in developing its expectations for substantive analytical procedures beyond observing the issuer generate this report. (AS 1105.10; AS 2305.16) Financial statement audit only | AS 1105.10; AS 2305.16 | Significant risk |
| 3 | Revenue | The issuer's contractual arrangements offered certain discounts primarily consisting of rebates and other deductions. For one type of revenue the issuer recorded these discounts as an expense. The firm did not evaluate whether the issuer's accounting for these discounts was in conformity with FASB ASC Topic 606. (AS 2301.08) Financial statement audit only | AS 2301.8 | Significant risk |
| 4 | Goodwill | The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of certain industry information it used in evaluating the reasonableness of certain significant assumptions. (AS 1105.04 and 06) Financial statement audit only | AS 1105.4; AS 1105.6 | Significant risk |
| 5 | Goodwill | The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of the significant assumptions related to revenue growth rates because it did not evaluate significant differences between these assumptions and industry information and historical experience. (AS 2501.16) Financial statement audit only | AS 2501.16 | Significant risk |
| 6 | Goodwill | The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain other significant assumptions because it did not take into account (1) certain contractual restrictions or (2) the issuer's written plans or other relevant documentation that could affect the issuer's ability to carry out its planned actions. (AS 2501.16 and .17) Financial statement audit only | AS 2501.16; AS 2501.17 | Significant risk |
Issuer J4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm identified a control deficiency related to the issuer's review of changes to prices maintained in the issuer's general ledger. The firm identified and tested various controls that it believed would mitigate this deficiency. The firm did not identify that these compensating controls did not address the risk of material misstatement related to inaccurate price changes. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Revenue | For one type of revenue the firm did not identify and test any controls that addressed the risk related to the completeness and accuracy of data transferred from the issuer's revenue system to the general ledger. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Deferred Revenue | The firm did not identify and test any controls that addressed the issuer's presentation of deferred revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Deferred Revenue | The firm did not identify and evaluate that the issuer's presentation of certain deferred revenue was not in conformity with FASB ASC Topic 210 Balance Sheet. (AS 2810.30 and .31) Both financial statement and ICFR audits | AS 2810.30; AS 2810.31 |
Issuer K3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The issuer recognized revenue from two of its business units based in part on labor hours recorded in a timekeeping system hosted by a service organization. The following deficiencies were identified: · The firm was unable to obtain a service auditor's report regarding the effectiveness of the service organization's controls for the year under audit. The firm identified and tested various compensating controls that it believed would mitigate its inability to obtain a service auditor's report. The firm did not identify that the control owners used labor hours in the performance of these compensating controls that were obtained from this timekeeping system. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Revenue and Related Accounts | The issuer recognized revenue from two of its business units based in part on labor hours recorded in a timekeeping system hosted by a service organization. The following deficiencies were identified: · The firm used labor hours from this timekeeping system in its testing of this revenue and related accounts. The firm did not perform any procedures to test or sufficiently test controls over the accuracy and completeness of these labor hours. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 3 | Business Combinations | During the year the issuer acquired a business and the firm used labor hours from another timekeeping system in its testing of (1) contract assets acquired and liabilities assumed and (2) the acquired business' revenue and related accounts. The firm did not perform any procedures to test or test controls over the accuracy and completeness of these labor hours. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer L3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Other Income | During the year the issuer sold several of its business units and recorded divestiture gains. The following deficiencies were identified: · The firm did not identify and test any controls over the calculation of the divestiture gains. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Other Income | During the year the issuer sold several of its business units and recorded divestiture gains. The following deficiencies were identified: · For certain divestitures the firm used information produced by the issuer in its testing of the divestiture gains but did not perform any procedures to test or test any controls over the accuracy and completeness of certain of this information. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 3 | Revenue | Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The firm performed procedures to test the accuracy of certain issuer-prepared data the firm used in its testing of the relative standalone selling prices. The extent of these procedures was not sufficient because the firm calculated its samples of items to test assuming a control reliance strategy but did not take into account that one of the controls the firm relied upon was ineffective. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer M4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Leases | The issuer used a specialist to estimate the issuer's oil and gas reserves that were used in the valuation of properties for which oil and gas reserves had been assigned. The issuer produced certain information that was (1) used in the firm's testing of revenue and lease operating expenses and (2) provided to the company's specialist. The firm did not perform any procedures to test or test controls over the accuracy and/or completeness of this information. (AS 1105.10 and .A8a) Financial statement audit only | AS 1105.10; AS 1105.A8a | |
| 2 | Leases | The firm used certain information produced by a related party in its testing of revenue and lease operating expenses but did not perform any procedures to evaluate the reliability of this information. (AS 1105.04 and .06) Financial statement audit only | AS 1105.4; AS 1105.6 | |
| 3 | Oil and Gas Properties | The company's specialist used certain other information provided by related parties of the issuer and an external source to estimate the issuer's oil and gas reserves. The following deficiencies were identified: · The firm's procedures to evaluate the relevance and reliability of the information provided by related parties were not sufficient because (1) it did not evaluate whether this information was relevant to the measurement objective and (2) when determining the number of items to test the firm did not take into account the source of the information. (AS 1105.A8a) Financial statement audit only | AS 1105.A8a | |
| 4 | Oil and Gas Properties | The company's specialist used certain other information provided by related parties of the issuer and an external source to estimate the issuer's oil and gas reserves. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of the information provided by the external source. (AS 1105.A8a) Financial statement audit only | AS 1105.A8a |
Issuer N2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. With respect to revenue at one business unit the firm did not perform any substantive procedures to evaluate the reasonableness of the standalone selling prices that the issuer used. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Revenue | With respect to certain revenue at the remaining business units (“other revenue”) the firm did not evaluate whether the risks of material misstatement that the firm associated with certain revenue at the first business unit that was subject to more extensive audit procedures also applied to this other revenue. (AS 2101.11 and .12) Financial statement audit only | AS 2101.11; AS 2101.12 |
Issuer O2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using forecasted cash flows which included significant assumptions related to revenue growth rates for the forecast period. The following deficiencies were identified: · For certain years within the forecast period the firm did not sufficiently evaluate the reasonableness of these significant assumptions because it did not (1) evaluate significant differences between the issuer's forecasted rates and industry growth information it used to support these rates (2) evaluate whether these forecasted rates were consistent with the issuer's historical and recent experience and (3) take into account the issuer's ability to achieve these forecasted rates. (AS 2501.16 and .17) Financial statement audit only | AS 2501.16; AS 2501.17 | |
| 2 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using forecasted cash flows which included significant assumptions related to revenue growth rates for the forecast period. The following deficiencies were identified: · For the remaining years within the forecast period the firm did not perform any procedures to evaluate the reasonableness of the forecasted revenue growth rates. (AS 2501.16) Financial statement audit only | AS 2501.16 |
Issuer P2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Warrants | During the year the issuer issued warrants that were recorded as equity and engaged a specialist to determine the fair values of these warrants. The firm's approach for substantively testing the fair values of these warrants was to test the issuer's process and the firm used an auditor-employed specialist to evaluate the significant assumptions the company's specialist developed. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because it did not (1) evaluate external data the auditor-employed specialist used to develop an independent expectation of one significant assumption and (2) identify that the auditor-employed specialist did not perform any procedures to evaluate certain of the other significant assumptions. (AS 1105.04 .06 and .A8b; AS 1201.C6 and .C7) Financial statement audit only | AS 1105.4; AS 1105.6; AS 1105.A8b; AS 1201.C6; AS 1201.C7 | |
| 2 | Warrants | During the year the issuer also issued warrants that were recorded as liabilities and engaged a specialist to determine the fair values of these warrants. The firm did not sufficiently evaluate the reasonableness of the significant assumptions used to value these warrants at year end because its procedures were limited to reading a memorandum prepared by the company's specialist and inquiring of management regarding changes in assumptions from the original issuance date. (AS 1105.A8b) Financial statement audit only | AS 1105.A8b |
Issuer Q2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Long-Lived Assets | The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm selected for testing a control that consisted of the issuer's review of its assessment of long-lived assets for possible impairment including the underlying cash-flow forecasts. The firm did not evaluate the specific review procedures that the control owner performed to assess the appropriateness of excluding certain costs from these cash-flow forecasts. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Long-Lived Assets | The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm selected for testing a control that consisted of the issuer's review of its assessment of long-lived assets for possible impairment including the underlying cash-flow forecasts. The firm did not identify and test any controls over the accuracy of certain data that were used in the operation of this control. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer R1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not identify and evaluate a misstatement in a required disclosure under FASB ASC Topic 606 related to the disaggregation of revenue. (AS 2810.30 and .31) In connection with our review the issuer reevaluated this disclosure and determined that an error existed that had not been previously identified. The issuer did not file an amended Form 10-K or Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this error in a subsequent filing by revising the disclosure. Financial statement audit only | AS 2810.30; AS 2810.31 |
Issuer S1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm performed procedures to test the accuracy and completeness of certain system-generated reports that the issuer used to estimate the reserve for excess and obsolete inventory. The extent of these procedures was not sufficient because the firm used the incorrect amount to calculate its samples of items to test from these reports. (AS 1105.10) Financial statement audit only | AS 1105.10 |