- Inspection year
- 2022
- Report date
- 07-Nov-2023
- PCAOB release
- 104-2024-043
- Audits reviewed
- 17
- Audits w/ Part I.A deficiencies
- 4
- Part I.A deficiency rate
- 24%
- Part I.A deficiencies
- 10
- Part I.B deficiencies
- 1
- 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 A4 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 that assumed significant revenue growth and improved gross margins. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of the significant assumptions it used to determine the fair value of this asset. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the reasonableness of the revenue growth rate and gross margin assumptions. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 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 that assumed significant revenue growth and improved gross margins. The following deficiencies were identified: · With respect to both the revenue growth rate and gross margin assumptions the firm did not sufficiently evaluate whether these assumptions were consistent with certain information including certain industry factors or the issuer's historical and recent experience because it did not evaluate the significant differences between these assumptions and that information. Further the firm did not take into account the issuer's ability to achieve the forecasted revenue growth and gross margins. (AS 2501.16 and .17) Both financial statement and ICFR audits | AS 2501.16; AS 2501.17 | Significant risk |
| 3 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using forecasted cash flows that assumed significant revenue growth and improved gross margins. The following deficiencies were identified: · With respect to the revenue growth rate assumptions the firm used information produced by the issuer and information from external sources including industry data and growth rates for comparable companies to evaluate the reasonableness of these assumptions. The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of certain information produced by the issuer. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
| 4 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using forecasted cash flows that assumed significant revenue growth and improved gross margins. The following deficiencies were identified: · With respect to the revenue growth rate assumptions the firm used information produced by the issuer and information from external sources including industry data and growth rates for comparable companies to evaluate the reasonableness of these assumptions. The firm did not evaluate the relevance and reliability of certain industry data and the relevance of the growth rates for the comparable companies. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 | Significant risk |
Issuer B3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue based on the daily market price of a commodity that the issuer obtained from a service organization. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's investigation of daily price variances that exceeded a certain threshold. The firm did not evaluate whether the threshold the control owner used to investigate variances was sufficiently precise to detect misstatements that could be material. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 2 | Revenue | The issuer recognized certain revenue based on the daily market price of a commodity that the issuer obtained from a service organization. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's investigation of daily price variances that exceeded a certain threshold. The firm did not perform any procedures to obtain evidence regarding the service organization's controls for the year under audit. (AS 2201.39 and .B19) Both financial statement and ICFR audits | AS 2201.39; AS 2201.B19 | |
| 3 | Revenue | The issuer recognized certain revenue based on the daily market price of a commodity that the issuer obtained from a service organization. The following deficiencies were identified: · The firm obtained the service organization's pricing information from the issuer and used it in its substantive testing of this revenue but did not perform any procedures to evaluate the reliability of this information. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 |
Issuer C2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired multiple businesses and engaged a specialist to assist in the determination of the fair values of certain assets acquired using forecasted cash flows and other assumptions. The following deficiencies were identified: · The firm selected for testing a control over the valuation of the assets acquired and liabilities assumed that included the reviews of the assumptions the issuer and the company's specialist used in these forecasted cash flows and other assumptions used to determine these fair values. In its testing of the operating effectiveness of this control the firm did not evaluate the specific review procedures that the control owners performed to evaluate the reasonableness of a significant assumption for one of the business combinations selected for testing. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | Significant risk |
| 2 | Business Combinations | During the year the issuer acquired multiple businesses and engaged a specialist to assist in the determination of the fair values of certain assets acquired using forecasted cash flows and other assumptions. The following deficiencies were identified: · The firm's approach for substantively testing the fair values of certain acquired assets was to test the issuer's process. The firm used an auditor-employed specialist to evaluate the significant assumptions the company's specialist used. For certain of these assets the firm did not sufficiently evaluate the reasonableness of these significant assumptions because it did not identify that the auditor-employed specialist did not perform any procedures beyond reading the valuation report that was prepared by the company's specialist to evaluate certain significant assumptions developed by the issuer. (AS 1201. C6 and .C7; AS 2501.16) Both financial statement and ICFR audits | AS 1201.C6; AS 1201.C7; AS 2501.16 | Significant risk |
Issuer D1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business. The firm did not identify and evaluate that the issuer's accounting for a provision for contingent payments to the sellers as equity and the omission of required disclosures related to this provision were not in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity. (AS 2810.30 and .31) Unrelated to our review the issuer reevaluated its accounting and disclosures for this business combination and concluded that material 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 2810.30; AS 2810.31 |