- Inspection year
- 2023
- Report date
- 25-Jan-2024
- PCAOB release
- 104-2024-045
- Audits reviewed
- 2
- Audits w/ Part I.A deficiencies
- 1
- Part I.A deficiency rate
- 50%
- Part I.A deficiencies
- 15
- Part I.B deficiencies
- 3
- Report
- View PDF ↗
Deficiencies (15)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A15 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer used certain qualitative factors to determine the qualitative component of the ALL. The firm selected for testing a review control over certain data used in the calculation of the qualitative reserve. 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 |
| 2 | Allowance for Credit/Loan Losses | Loan risk grades were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk grades assigned by the issuer to certain categories of loans. The control included the review of loan risk grades by the issuer's external loan reviewer (ELR). The following deficiencies were identified: · The firm did not evaluate the review procedures that the control owners performed to evaluate the appropriateness of the issuer's loan grades. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 3 | Allowance for Credit/Loan Losses | Loan risk grades were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk grades assigned by the issuer to certain categories of loans. The control included the review of loan risk grades by the issuer's external loan reviewer (ELR). The following deficiencies were identified: · The ELR reviewed loan risk grades as of an interim date. The firm did not identify and test any controls over the loans that were subject to review by the ELR from the interim date to the issuer's year end. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 4 | Allowance for Credit/Loan Losses | Loan risk grades were an important input in estimating the issuer's ALL. The firm selected for testing a control designed to validate loan risk grades assigned by the issuer to certain categories of loans. The control included the review of loan risk grades by the issuer's external loan reviewer (ELR). The following deficiencies were identified: · The firm did not identify and test any controls over the reasonableness of loan risk grades for loans that were not subject to this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 5 | Allowance for Credit/Loan Losses | On a periodic basis the issuer evaluates potential problem loans. The firm selected for testing a control that included the review of potential problem loans. The following deficiencies were identified: · 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 |
| 6 | Allowance for Credit/Loan Losses | On a periodic basis the issuer evaluates potential problem loans. The firm selected for testing a control that included the review of potential problem loans. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of reports used by the control owners. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 7 | Allowance for Credit/Loan Losses | The issuer's ALL included loans individually evaluated for impairment. The firm did not identify and test any controls over the reasonableness of the fair value of the collateral used in the loan impairment calculation for certain individually evaluated loans. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 8 | Allowance for Credit/Loan Losses | The firm's approach for substantively testing the qualitative component of the ALL was to review and test the issuer's process. The firm did not perform procedures to evaluate whether the issuer had a reasonable basis for the significant assumptions related to basis point qualitative factors used to determine the qualitative component of the ALL beyond obtaining and reading an issuer-prepared narrative. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Significant risk |
| 9 | Allowance for Credit/Loan Losses | The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the fair value of collateral based on the company's specialists' valuation reports that it selected for testing because although it determined it needed additional evidence for valuation reports that were significantly aged it limited its procedures to inquiry and obtaining information from external sources without evaluating the relevance and reliability of that information. (AS 1105.04 .06 and .A10; AS 2501.07) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6; AS 1105.A10; AS 2501.7 | Significant risk |
| 10 | Allowance for Credit/Loan Losses | The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the fair value of collateral based on the company's specialists' valuation reports that it selected for testing because it did not perform further procedures to use the work of the company's specialist as audit evidence. (AS 1105.A1 - .A10; AS 2501.07) Both financial statement and ICFR audits | AS 1105.A1; AS 1105.A10; AS 1105.A2; AS 1105.A3; AS 1105.A4; AS 1105.A5; AS 1105.A6; AS 1105.A7; AS 1105.A8; AS 1105.A9; AS 2501.7 | Significant risk |
| 11 | Allowance for Credit/Loan Losses | The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm's approach to test the fair value of the collateral based on the issuer's internal model it selected for testing was to develop an independent expectation. The firm did not perform any procedures to demonstrate it had a reasonable basis for the assumptions used (AS 2501.22) Both financial statement and ICFR audits | AS 2501.22 | Significant risk |
| 12 | Allowance for Credit/Loan Losses | The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm's approach to test the fair value of the collateral based on the issuer's internal model it selected for testing was to develop an independent expectation. The firm did not perform any procedures to evaluate the relevance and reliability of certain information it obtained from an external source that it used to develop its independent expectation. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 | Significant risk |
| 13 | Deposit Liabilities | The issuer's deposit liability transactions included certain deposits processed through information systems that were outside of the issuer's core deposit liability system. The firm did not identify and test any controls over deposit transactions initiated outside of the issuer's core deposit system. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 14 | Deposit Liabilities | The firm selected for testing a control over deposit liability reconciliations. The firm did not evaluate the specific review procedures that the control owners performed to determine whether reconciling items were appropriately resolved. (AS 2201.42 and 44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 15 | Journal Entries | The firm identified journal entries that met certain fraud criteria. The firm judgmentally selected certain of those journal entries for testing without having an appropriate basis for limiting its testing to these journal entries. Further for journal entries meeting one of the identified fraud criteria the firm did not select any of the entries for testing. (AS 2401.61) Both financial statement and ICFR audits | AS 2401.61 |