- Inspection year
- 2023
- Report date
- 23-May-2024
- PCAOB release
- 104-2024-075
- Audits reviewed
- 29
- Audits w/ Part I.A deficiencies
- 25
- Part I.A deficiency rate
- 86%
- Part I.A deficiencies
- 134
- Part I.B deficiencies
- 11
- Report
- View PDF ↗
Deficiencies (134)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer recorded revenue at the time its services were provided to its customers. The firm did not perform any substantive procedures to test whether the performance obligation had been fully satisfied before revenue was recognized. (AS 2301.08) Financial statement audit only | AS 2301.8 | Incorrect opinion |
| 2 | Revenue | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm used information produced by the issuer in its testing of transaction prices but did not perform any procedures to test or test any controls over the accuracy and/or completeness of certain of this information. (AS 1105.10) Financial statement audit only | AS 1105.10 | Incorrect opinion |
| 3 | Warrants | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer issued warrants that were recorded as liabilities. The firm did not identify and evaluate misstatements in the fair value measurement of these warrants. (AS 2810.30) In connection with our review the issuer reevaluated its accounting for these warrants 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 2810.30 | Incorrect opinion |
Issuer B7 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Loans Receivable | The issuer held loans receivable that were measured at fair value. The issuer determined the fair values of these loans based on discounted cash flows it developed using various significant assumptions including the issuer's approach to grouping loans in order to estimate fair value. The following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's (1) comparison of actual cash flows to forecasted cash flows (2) reviews of the reasonableness of discount rates and (3) review of its disclosures related to loans receivable. The firm did not evaluate the specific review procedures that the control owners performed to identify items for follow up investigate identified variances and/or determine whether items identified for follow up had been appropriately resolved. (AS 2201.42 and .44) In connection with our review the issuer reevaluated its controls over loans receivable 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 | Incorrect opinion |
| 2 | Loans Receivable | The issuer held loans receivable that were measured at fair value. The issuer determined the fair values of these loans based on discounted cash flows it developed using various significant assumptions including the issuer's approach to grouping loans in order to estimate fair value. The following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's (1) comparison of actual cash flows to forecasted cash flows (2) reviews of the reasonableness of discount rates and (3) review of its disclosures related to loans receivable. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of two of these controls. (AS 2201.39) In connection with our review the issuer reevaluated its controls over loans receivable 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 | Incorrect opinion |
| 3 | Loans Receivable | The issuer held loans receivable that were measured at fair value. The issuer determined the fair values of these loans based on discounted cash flows it developed using various significant assumptions including the issuer's approach to grouping loans in order to estimate fair value. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the (1) reasonableness of the issuer's grouping of loans and (2) mathematical logic of the discounted cash flow models used by the issuer to determine the fair values of these loans. (AS 2201.39) In connection with our review the issuer reevaluated its controls over loans receivable 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 | Incorrect opinion |
| 4 | Loans Receivable | The firm's approach for substantively testing the fair values of these loans was to test the issuer's process. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of the significant assumptions related to the expected timing of cash flows and the grouping of loans. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Incorrect opinion |
| 5 | Loans Receivable | The firm's approach for substantively testing the fair values of these loans was to test the issuer's process. The following deficiencies were identified: · The firm used an auditor-employed specialist to evaluate the discount rates the issuer selected from a range of potential discount rates it 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 evaluate whether the issuer had a reasonable basis for (1) the discount rates used and (2) the issuer's selection of the discount rates from the range of potential discount rates. (AS 1201.C6 and .C7; AS 2501.16) Both financial statement and ICFR audits | AS 1201.C6; AS 1201.C7; AS 2501.16 | Incorrect opinion |
| 6 | Loans Receivable | The firm's approach for substantively testing the fair values of these loans was to test the issuer's process. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of the significant assumptions related to the expected timing of cash flows and the grouping of loans. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.10 | Incorrect opinion |
| 7 | Loans Receivable | The firm used an issuer-prepared schedule in its substantive testing of certain loans-receivable disclosures but did not perform any procedures to test or test controls over the accuracy and completeness of this schedule. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Incorrect opinion |
Issuer C33 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm selected for testing a control that consisted of the issuer's review of customer pricing changes subsequent to the execution renewal or amendment of a customer contract with preferential pricing. The number of changes selected for testing did not provide sufficient appropriate audit evidence given the frequency with which the control operated. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 2 | Accounts Receivable | The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm selected for testing controls that included the issuer's review of customers' status. The firm did not test the aspects of these controls that addressed the issuer's review of changes to existing customers' status. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Accounts Receivable | The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm did not identify and test any controls over the accuracy of product cost information the issuer used to determine the sales prices in accordance with certain customer contracts. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Accounts Receivable | The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm did not perform procedures to test or test controls over the accuracy and/or completeness of certain system-generated data or reports the firm used in its substantive testing of this revenue. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 5 | Accounts Receivable | For two business units the firm did not identify and test any controls over the accuracy and completeness of certain information used to record revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Accounts Receivable | For these same business units the firm selected for testing certain controls that prevented the processing of orders for customers on credit hold. The firm did not test beyond inquiry the aspect of these controls that addressed which users had the ability to release customers from credit hold. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Accounts Receivable | For one of these business units the firm selected for testing a control over the issuer's review of certain customer's accounts receivable balances. The firm did not identify and test any controls over the accuracy and completeness of a report used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Accounts Receivable | For two other business units the firm did not identify and test any controls that addressed the risk of material misstatement related to the acceptance of invalid or unauthorized customer orders. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 9 | Accounts Receivable | The sample sizes the firm used in certain of its substantive procedures to test revenue 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 | |
| 10 | Accounts Receivable | The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · In determining the extent to which audit procedures should be performed the firm did not evaluate (1) the materiality of these business units (2) the decentralized nature of records and information processing at these business units and (3) whether the risks of material misstatement that the firm identified for the business units subject to more extensive audit procedures also applied to these business units. (AS 2101.11 and .12; AS 2201.B10) Both financial statement and ICFR audits | AS 2101.11; AS 2101.12; AS 2201.B10 | |
| 11 | Accounts Receivable | The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · To address the risks of material misstatement related to revenue for these business units the firm selected for testing a control that included the issuer's comparisons and reviews of the consolidated (1) budget to actual results and (2) prior-period actual results to current-period actual results. The firm did not evaluate the specific review procedures that the control owner performed to investigate identified variances and determine whether items identified for follow up had been appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 12 | Accounts Receivable | The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · To address the risks of material misstatement related to revenue for these business units the firm selected for testing a control that included the issuer's comparisons and reviews of the consolidated (1) budget to actual results and (2) prior-period actual results to current-period actual results. The firm did not identify and test any controls over the review of the budget used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 13 | Accounts Receivable | The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · To firm did not perform any substantive procedures to test revenue for these business units. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 14 | Debt | The firm sent positive confirmation requests to the issuer's lenders. The following deficiencies were identified related to the confirmation requests for one of the lenders: · The firm did not maintain control over a confirmation request through direct communication between the firm and the intended recipient of the request. (AS 2310.28) Both financial statement and ICFR audits | AS 2310.8 | |
| 15 | Debt | The firm sent positive confirmation requests to the issuer's lenders. The following deficiencies were identified related to the confirmation requests for one of the lenders: · The confirmation response was returned by email. The firm performed procedures to verify the source of the response but did not evaluate certain inconsistencies it identified through the performance of these procedures. (AS 2310.29) Both financial statement and ICFR audits | AS 2310.29 | |
| 16 | Debt | The firm did not identify and test any controls that addressed the issuer's compliance with certain non-financial contractual debt covenants. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 17 | Debt | The firm did not perform any substantive procedures to test the issuer's compliance with these covenants. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 18 | Debt | The firm used certain issuer-prepared schedules in its substantive testing of certain debt disclosures. The firm did not perform any procedures to test or test controls over the accuracy of these schedules. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 19 | Debt | The firm used certain issuer-prepared schedules in its substantive testing of certain debt disclosures. The firm did not identify and evaluate certain differences between the issuer's debt disclosures and these schedules. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 20 | Debt | The firm did not perform any procedures to test the issuer's fair value disclosures for certain debt. (AS 2501.07) Both financial statement and ICFR audits | AS 2501.7 | |
| 21 | Business Combinations | During the year the issuer acquired multiple businesses. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of the fair values of assets acquired in these business combinations including the assumptions the issuer used. In its testing of the operating effectiveness of this control the firm did not evaluate whether an item identified for follow up was appropriately resolved. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 22 | Business Combinations | During the year the issuer acquired multiple businesses. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of the fair values of assets acquired in these business combinations including the assumptions the issuer used. In its testing of the operating effectiveness of this control the firm did not identify and test any controls over the accuracy and completeness of certain data used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 23 | Business Combinations | During the year the issuer acquired multiple businesses. The following deficiencies were identified: · From one of these business combinations the firm did not sufficiently evaluate whether an assumption was consistent with historical and recent experience because it did not evaluate the significant differences between the assumption and this experience. Further when evaluating the issuer's ability to carry out its planned course of action the firm performed a sensitivity analysis for this assumption but did not evaluate the significant differences between the alternative assumptions it used in this analysis and the issuer's historical and recent experience. (AS 2501.16 and .17) Both financial statement and ICFR audits | AS 2501.16; AS 2501.17 | |
| 24 | Business Combinations | During the year the issuer acquired multiple businesses. The following deficiencies were identified: · The firm did not identify and evaluate a misstatement in a required disclosure under FASB ASC Topic 805 Business Combinations. (AS 2810.30 and .31) Both financial statement and ICFR audits | AS 2810.30; AS 2810.31 | |
| 25 | Intangible Assets | The firm did not identify and test any controls that addressed whether the issuer used appropriate useful lives in the calculation of amortization expense for finite-lived intangible assets. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 26 | Intangible Assets | The firm did not identify and evaluate a misstatement in a required disclosure under FASB ASC Topic 350 Intangibles – Goodwill and Other. (AS 2810.30 and .31) Both financial statement and ICFR audits | AS 2810.30; AS 2810.31 | |
| 27 | Financial Reporting and Close | The firm did not identify and test any controls over the accuracy of certain schedules the issuer used to determine its financial statement disclosures. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 28 | Financial Reporting and Close | The firm selected for testing a control that was designed to address the firm's identified fraud risk related to inappropriate changes being made to certain business unit sub-ledgers prior to consolidation. In its testing of the operating effectiveness of this control the firm did not evaluate the specific review procedures that the control owner performed to investigate identified differences. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 29 | Financial Reporting and Close | The firm selected for testing a control that was designed to address the firm's identified fraud risk related to inappropriate changes being made to certain business unit sub-ledgers prior to consolidation. In its testing of the operating effectiveness of this control the firm did not identify and test any controls over the accuracy and completeness of certain business unit sub-ledgers used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 30 | Financial Reporting and Close | The firm's substantive procedures to address the risk related to inappropriate changes consisted of an independent comparison of certain business unit sub-ledgers to the general ledger. The following deficiencies were identified: · The firm (1) limited its comparison to certain accounts and (2) identified differences in its testing of these accounts but did not perform procedures to evaluate these differences other than concluding that the differences were not material in the aggregate. (AS 2301.13) Both financial statement and ICFR audits | AS 2301.13 | |
| 31 | Financial Reporting and Close | The firm's substantive procedures to address the risk related to inappropriate changes consisted of an independent comparison of certain business unit sub-ledgers to the general ledger. The following deficiencies were identified: · The firm did not perform procedures to test or test controls over the accuracy and completeness of the business unit sub-ledgers it used in its testing. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 32 | Financial Reporting and Close | The firm identified a fraud risk related to the potential for management to override controls including recording unsupported journal entries. For the business units the firm subjected to less extensive audit procedures the following deficiencies were identified: · The firm did not identify and test any controls that addressed this risk. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 33 | Financial Reporting and Close | The firm identified a fraud risk related to the potential for management to override controls including recording unsupported journal entries. For the business units the firm subjected to less extensive audit procedures the following deficiencies were identified: · The firm did not perform any substantive procedures to test journal entries to address this risk. (AS 2401.58) Both financial statement and ICFR audits | AS 2401.58 |
Issuer D9 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The issuer recorded revenue net of customer sales incentives and returns. The following deficiencies were identified with respect to one business unit: · The firm selected for testing a control that consisted of the issuer's review of the sales incentive reserve. The firm did not evaluate the specific review procedures that the control owner performed to assess the (1) reasonableness of the sales incentive reserve and (2) accuracy and completeness of certain information used to determine the sales incentive reserve. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 2 | Revenue and Related Accounts | The issuer recorded revenue net of customer sales incentives and returns. The following deficiencies were identified with respect to one business unit: · The firm selected for testing a control that consisted of the issuer's review of sales returns. The firm did not identify and test any controls over the accuracy and completeness of return information used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 3 | Revenue and Related Accounts | The issuer recorded revenue net of customer sales incentives and returns. The following deficiencies were identified with respect to one business unit: · The firm did not perform any procedures to test or test controls over the accuracy and completeness of a report produced by the issuer that it used in its substantive testing of the sales incentive reserve. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
| 4 | Revenue and Related Accounts | The issuer recorded revenue net of customer sales incentives and returns. The following deficiencies were identified with respect to one business unit: · The firm's approach to substantively test the issuer's sales return reserve was to develop an independent expectation of the estimate. The firm did not perform procedures to demonstrate it had a reasonable basis for the method used to develop its independent expectation. (AS 2501.22) Both financial statement and ICFR audits | AS 2501.22 | Significant risk |
| 5 | Revenue and Related Accounts | The firm selected for testing a control over the issuer's review of the accuracy of pricing information used to record revenue at this business unit. The firm did not identify and test any controls over the accuracy of certain information used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 6 | Revenue and Related Accounts | The sample sizes the firm used in certain of its substantive procedures to test revenue and related accounts at this business unit 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 |
| 7 | Revenue and Related Accounts | For a second business unit the firm's approach to substantively test the issuer's sales incentive and sales return reserves was to examine transactions that occurred after year end. The firm did not evaluate whether the audit evidence obtained was sufficient including whether the evidence supported or contradicted these estimates. (AS 2501.28) Both financial statement and ICFR audits | AS 2501.28 | Significant risk |
| 8 | Inventory | The firm selected for testing a control over the issuer's review of the reserve for excess and obsolete inventory at one business unit. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 9 | Journal Entries | The firm identified a fraud risk related to the potential for management to override controls including recording unsupported journal entries. The firm subjected certain of the issuer's business units to less extensive audit procedures. The firm did not perform any substantive procedures to test journal entries to address this risk at these business units. (AS 2401.58) Both financial statement and ICFR audits | AS 2401.58 |
Issuer E10 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Payable | The firm's internal inspection program had inspected this audit and reviewed the Information Technology General Controls (ITGCs) area but did not identify the deficiency below. For one business unit the issuer used an information-technology (IT) system to initiate process and record transactions related to revenue accounts receivable inventory and accounts payable. 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 this IT system. The firm did not identify and test any controls that addressed the risk that certain unauthorized changes were made to this system. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Accounts Payable | For one business unit the issuer used an information-technology (IT) system to initiate process and record transactions related to revenue accounts receivable inventory and accounts payable. 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 this IT system. The firm did not identify and test any controls that addressed the risk that certain unauthorized changes were made to this system. As a result of this deficiency in the firm's testing of 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 | |
| 3 | Accounts Payable | As a result of the firm's ITGC testing deficiency the firm did not perform sufficient other audit procedures as follows: · For certain revenue accounts receivable and inventory the firm did not perform sufficient procedures to test or sufficiently test controls over the accuracy and/or completeness of certain system-generated data or reports the firm used (1) to make its selections to test certain controls and (2) in its substantive testing. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 4 | Accounts Payable | As a result of the firm's ITGC testing deficiency the firm did not perform sufficient other audit procedures as follows: · The sample sizes the firm used in certain of 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. (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 | Inventory | For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm did not identify and test any controls over inventory costing. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Inventory | For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's performance of physical inventory counts. The firm did not test the aspect of these controls that addressed whether recorded inventory reflected the results of the issuer's physical counts. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Inventory | For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm did not perform sufficient procedures to test the existence of this inventory because it did not inspect any records of the issuer's counts on which the year-end inventory was based. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 8 | Inventory | For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The sample sizes the firm used in certain of its substantive procedures to test inventory 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 | |
| 9 | Journal Entries | The firm identified a fraud risk related to the potential for management to override controls including recording unsupported journal entries. The firm subjected certain of the issuer's business units to less extensive audit procedures. With respect to these business units the following deficiencies were identified: · The firm did not identify and test any controls that addressed this risk. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 10 | Journal Entries | The firm identified a fraud risk related to the potential for management to override controls including recording unsupported journal entries. The firm subjected certain of the issuer's business units to less extensive audit procedures. With respect to these business units the following deficiencies were identified: · The firm did not perform any substantive procedures to test journal entries to address this risk. (AS 2401.58) Both financial statement and ICFR audits | AS 2401.58 |
Issuer F13 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For one business unit the firm's substantive procedures to test revenue consisted of testing a sample of transactions. For certain of the transactions it selected for testing the firm was unable to obtain evidence demonstrating that the performance obligation had been satisfied when revenue was recognized. The firm did not consider the effect of these unexamined transactions on its evaluation of the sample results. (AS 2315.25) Both financial statement and ICFR audits | AS 2315.25 | |
| 2 | Revenue | For a second business unit the following deficiencies were identified: · The firm did not identify and test any controls that addressed the risk related to accuracy of the quantity of items ordered. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Revenue | For a second business unit the following deficiencies were identified: · The sample size the firm used in its substantive procedures to test this revenue was 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 deficiency 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 | |
| 4 | Inventory | For one business unit the firm selected for testing the issuer's cycle-count control over the existence of inventory. The firm did not evaluate whether this control was designed to address whether all recorded inventory items were counted. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 5 | Inventory | Due to the deficiency discussed above the firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11) Both financial statement and ICFR audits | AS 2510.11 | |
| 6 | Inventory | For another business unit the issuer performed full physical counts of inventory at various locations before year end. To test the existence of inventory at these locations the firm observed the issuer's physical counts and made certain independent test counts. The following deficiencies were identified: · For one of these locations the firm obtained an inventory listing from a date subsequent to the issuer's physical count. The firm did not inspect any records of the issuer's counts and apply appropriate tests of intervening transactions between the date of the issuer's counts and the date of the inventory listing. (AS 2510.12) Both financial statement and ICFR audits | AS 2510.12 | |
| 7 | Inventory | For another business unit the issuer performed full physical counts of inventory at various locations before year end. To test the existence of inventory at these locations the firm observed the issuer's physical counts and made certain independent test counts. The following deficiencies were identified: · For another location the firm did not perform any procedures to evaluate certain differences it identified from its independent test counts. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 8 | Inventory | For another business unit the issuer performed full physical counts of inventory at various locations before year end. To test the existence of inventory at these locations the firm observed the issuer's physical counts and made certain independent test counts. The following deficiencies were identified: · For two locations and certain other locations the firm did not perform appropriate procedures to test or test controls over the accuracy and/or completeness of certain issuer-produced reports it used to test intervening transactions between the dates of its inventory observations and year end. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 9 | Business Combinations | During the year the issuer acquired several businesses. The firm selected for testing a control that included the issuer's review of the fair values of assets acquired in these business combinations including the significant assumptions used. The firm did not evaluate the specific review procedures the control owner performed to assess the reasonableness of certain significant assumptions. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 10 | Business Combinations | During the year the issuer acquired several businesses. The firm selected for testing a control that included the issuer's review of the fair values of assets acquired in these business combinations including the significant assumptions used. The firm did not identify and test any controls over the accuracy and completeness of certain data used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 11 | Business Combinations | During the year the issuer acquired several businesses. For one of these business combinations the issuer engaged a specialist to assist it in determining the fair values of certain acquired intangible assets using various significant assumptions developed by the issuer or the company's specialist. The following deficiencies were identified: · The firm used an auditor-employed specialist to evaluate the reasonableness of a significant assumption developed by the company's specialist that was used in the measurement of an acquired intangible asset. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because the auditor-employed specialist did not evaluate (1) whether this assumption was consistent with recent existing market information and (2) whether certain data the company's specialist used to develop this assumption were relevant to the assumption beyond observing that the data were from comparable industries. (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 | |
| 12 | Business Combinations | During the year the issuer acquired several businesses. For one of these business combinations the issuer engaged a specialist to assist it in determining the fair values of certain acquired intangible assets using various significant assumptions developed by the issuer or the company's specialist. The following deficiencies were identified: · The firm used an auditor-employed specialist to evaluate the reasonableness of a significant assumption developed by the company's specialist that was used in the measurement of an acquired intangible asset. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because the auditor-employed specialist did not evaluate (1) whether this assumption was consistent with recent existing market information and (2) whether certain data the company's specialist used to develop this assumption were relevant to the assumption beyond observing that the data were from comparable industries. (AS 1105.A8a and .A8b; AS 1201.C6 and .C7) Both financial statement and ICFR audits | AS 2501.16 | |
| 13 | Business Combinations | During the year the issuer acquired several businesses. For one of these business combinations the firm did not perform any substantive procedures to test the existence of inventory at the acquisition date. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer G12 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | The issuer used various service organizations for the custody recordkeeping and processing of certain investment transactions and these service organizations used sub-service organizations for certain functions. The firm obtained the service auditor's reports for each of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm selected for testing a control that addressed the issuer's review of certain investments for potential impairment. The firm did not evaluate whether the control was designed to consider all of the relevant requirements of FASB ASC Topic 326 Current Expected Credit Losses when assessing whether an impairment loss or credit impairment existed for these investments. (AS 2201.42 and .B22) Both financial statement and ICFR audits | AS 2201.42; AS 2201.B22 | |
| 2 | Investments | The issuer used various service organizations for the custody recordkeeping and processing of certain investment transactions and these service organizations used sub-service organizations for certain functions. The firm obtained the service auditor's reports for each of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm selected for testing a control that addressed the issuer's review of certain investments for potential impairment. The firm did not evaluate whether the control was designed to consider all of the relevant requirements of FASB ASC Topic 326 Current Expected Credit Losses when assessing whether an impairment loss or credit impairment existed for these investments. (AS 2201.42 and .B22) Both financial statement and ICFR audits | AS 2201.42; AS 2201.B22 | |
| 3 | Investments | The issuer used various service organizations for the custody recordkeeping and processing of certain investment transactions and these service organizations used sub-service organizations for certain functions. The firm obtained the service auditor's reports for each of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm selected for testing a control over the review of monthly investment reconciliations. The firm did not identify and test any controls over the accuracy and completeness of certain reports used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Investments | The issuer used various service organizations for the custody recordkeeping and processing of certain investment transactions and these service organizations used sub-service organizations for certain functions. The firm obtained the service auditor's reports for each of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm did not obtain an understanding of or test any relevant controls at certain sub-service organizations. (AS 2201.39 and .B19) Both financial statement and ICFR audits | AS 2201.39; AS 2201.B19 | |
| 5 | Investments | The issuer used various service organizations for the custody recordkeeping and processing of certain investment transactions and these service organizations used sub-service organizations for certain functions. The firm obtained the service auditor's reports for each of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · For one sub-service organization the firm did not perform any procedures to evaluate whether there were any changes in the sub-service organization's controls from the date of the service auditor's report to year end given the length of period under audit not covered by the service auditor's report. (AS 2201.B24 and .B25) Both financial statement and ICFR audits | AS 2201.B24; AS 2201.B25 | |
| 6 | Investments | The sample size the firm used in certain of its substantive procedures to test these investments was 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 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 | Investments | The firm did not perform sufficient procedures to evaluate the issuer's conclusion that no impairment or credit loss existed for certain investments because it did not take into account certain relevant requirements of FASB ASC Topic 326. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 8 | Investments | The firm used an auditor-engaged specialist to assist it with evaluating the appropriateness of the issuer's categorization of investments within the fair value hierarchy set forth in FASB ASC Topic 820 Fair Value Measurement. The firm identified certain differences between the categorizations determined by the issuer and those determined by the auditor-engaged specialist but did not perform any procedures to evaluate these differences. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 9 | Liabilities for Insurance Reserves | The issuer used an IT system to process and record transactions and data which the issuer used in estimating its insurance reserves. The firm selected for testing controls over change management for this system but did not perform any procedures to test or test any controls over the completeness of the population of items from which it selected its samples for testing. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
| 10 | Liabilities for Insurance Reserves | The issuer used an IT system to process and record transactions and data which the issuer used in estimating its insurance reserves. In its testing of controls over insurance reserves the firm tested various IT-dependent manual controls that used data 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 controls was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | Significant risk |
| 11 | Liabilities for Insurance Reserves | The issuer used an IT system to process and record transactions and data which the issuer used in estimating its insurance reserves. In its testing of controls over insurance reserves the firm tested various IT-dependent manual controls that used data generated or maintained by this IT system. The firm did not identify and test any controls over the reliability of certain data that the issuer obtained from external parties and used in the operation of these IT-dependent controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 12 | Liabilities for Insurance Reserves | The firm's approach for substantively testing insurance reserves was to develop an independent expectation using these external data. The firm did not evaluate the reliability of these data used in developing its independent expectation. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 | Significant risk |
Issuer H8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Payable | The firm used the work of internal audit as evidence of the effectiveness of certain controls over revenue inventory and accounts payable that the firm selected for testing. The firm identified that certain individuals from internal audit also served as control owners for certain of these controls. The firm did not sufficiently assess the objectivity of internal audit because it did not determine whether these individuals participated in the audit of these controls. (AS 2201.18; AS 2605.10) Both financial statement and ICFR audits | AS 2201.18; AS 2605.10 | |
| 2 | Inventory | The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · For one of these controls the firm did not test beyond inquiry certain aspects of this control. Further in evaluating the design of another aspect of this control the firm did not determine whether certain items identified for follow up were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Inventory | The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · In evaluating the design of an aspect of another control the firm did not evaluate whether the thresholds the control owner used to identify items for investigation were sufficiently precise to detect material misstatements. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 4 | Inventory | The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy of certain information used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 5 | Inventory | To test the existence of this inventory the firm performed independent physical counts of inventory at year end. The following deficiency was identified: · The firm did not sufficiently test inventory because it did not compare the inventory listings it used to perform its substantive procedures to the recorded balance. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 6 | Inventory | To test the existence of this inventory the firm performed independent physical counts of inventory at year end. The following deficiency was identified: · The firm's sample size for testing the existence of this inventory 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 2315.16 .23 and .23A) Both financial statement and ICFR audits | AS 2315.16; AS 2315.23; AS 2315.23A | |
| 7 | Inventory | For certain inventory the firm did not identify and test any controls over the reserve for excess and obsolete inventory. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Inventory | The firm's substantive procedures to test the cost of certain inventory consisted of selecting a sample of items for testing. The sample size the firm used was too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported as it did not take into account that one of the controls it relied upon was ineffective. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer I6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The issuer used service organizations to process and/or record transactions for revenue and related accounts and the firm used certain information including delivery information produced by these service organizations in its substantive testing of these accounts. The following deficiencies were identified: · The firm did not perform any procedures to test the accuracy and/or completeness of certain of this information. (AS 2301.08 and .13) Financial statement audit only | AS 2301.8; AS 2301.13 | |
| 2 | Revenue and Related Accounts | The issuer used service organizations to process and/or record transactions for revenue and related accounts and the firm used certain information including delivery information produced by these service organizations in its substantive testing of these accounts. The following deficiencies were identified: · The firm's substantive procedures to test revenue included selecting a sample of revenue transactions. For certain selections the firm did not perform substantive procedures to test this delivery information beyond comparing the information to another report from the service organization. (AS 2301.08 and .13) Financial statement audit only | AS 2301.8; AS 2301.13 | |
| 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 which included significant assumptions related to sales growth product mix and pricing for the forecast period. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of the forecasted sales growth. (AS 2501.16) Financial statement audit only | AS 2501.16 | 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 which included significant assumptions related to sales growth product mix and pricing for the forecast period. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain pricing assumptions because it limited its procedures to inquiry of management and review of internal plans without taking into account the issuer's ability to carry out its planned course of action. (AS 2501.16 and .17) Financial statement audit only | AS 2501.16; AS 2501.17 | Significant risk |
| 5 | 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 sales growth product mix and pricing for the forecast period. The following deficiencies were identified: · The firm did not evaluate whether the issuer had a reasonable basis for (1) the product mix assumption and (2) another pricing assumption. (AS 2501.16) Financial statement audit only | AS 2501.16 | Significant risk |
| 6 | Intangible Assets | The firm did not perform procedures to evaluate certain indicators of potential impairment that existed at year end. (AS 2301.08) Financial statement audit only | AS 2301.8 |
Issuer J6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For certain revenue at one business unit the following deficiencies were identified: · For contracts with recurring monthly revenue the firm did not identify and test any controls over the recording of certain of this revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | For certain revenue at one business unit the following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of the accuracy and completeness of customer contract information in the issuer's system that it used to record revenue. In its testing of the operating effectiveness of this control the firm did not test this aspect of the control. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 3 | Revenue | For certain revenue at one business unit the following deficiencies were identified: · As a result of the deficiency identified the firm did not perform sufficient procedures to test or sufficiently test controls over the completeness of a report used in its substantive testing. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 4 | Revenue | For certain revenue at two other business units the firm selected for testing controls that addressed whether the performance obligation had been satisfied before revenue was recognized. The number of occurrences selected for testing did not provide sufficient appropriate audit evidence in light of either the assessed inherent risk associated with the account or the frequency of the operation of the control. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 5 | Revenue | For one of these two business units the firm did not perform any substantive procedures to test whether the performance obligation was satisfied before revenue was recognized for the first 10 months of the year. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 6 | Revenue | The sample sizes the firm used in certain of its substantive procedures to test revenue were too small to provide sufficient appropriate audit evidence because (1) 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 and/or (2) in determining the sample size the firm did not take into account the allowable risk of incorrect acceptance. (AS 2301.16 .18 and .37; AS 2315.16 .19 .23 and .23A) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.16; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer K4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer used a service organization to accumulate revenue data initiated in and processed by the issuer's various IT systems and the issuer recorded certain revenue based on these data. The following deficiency was identified: · The firm did not identify and test any controls over the accuracy and completeness of the revenue data that had been accumulated by the service organization from the various IT systems. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The issuer used a service organization to accumulate revenue data initiated in and processed by the issuer's various IT systems and the issuer recorded certain revenue based on these data. The following deficiency was identified: · The firm did not perform procedures to test or identify and test controls over the accuracy and/or completeness of certain of these data that the firm used in its substantive testing of this revenue. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 3 | Revenue | The issuer used a service organization to accumulate revenue data initiated in and processed by the issuer's various IT systems and the issuer recorded certain revenue based on these data. The following deficiency was identified: · The sample size the firm used in its substantive procedures to test certain of this revenue was 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 deficiency 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 | |
| 4 | Business Combinations | During the year the issuer acquired a business. The firm selected for testing a control that included the issuer's review of the valuation of acquired intangible assets and related assumptions. The firm did not identify and test any controls over the accuracy and completeness of certain data used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |
Issuer L2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue based on customer activity that was tracked using the issuer's various IT systems and it used service organizations to process customer payments. The firm's approach for substantively testing certain of this revenue consisted primarily of performing a software-assisted analysis to test the relationships between revenue and cash receipts. The reliability of the audit evidence obtained from this analysis was dependent upon the firm's testing of the underlying data. The firm did not sufficiently test the accuracy of the underlying data because the firm did not perform any procedures to (1) test or test controls over certain internally generated information that it used and (2) test the issuer's complementary user controls that the service auditor's reports described as necessary to rely on this payment information. (AS 1105.10; AS 2301.08 and .13) Financial statement audit only | AS 1105.10; AS 2301.8; AS 2301.13 | |
| 2 | Journal Entries | To identify and select journal entries for testing the firm identified fraud characteristics and obtained a list of all journal entries with these characteristics. The firm did not perform sufficient procedures to test those journal entries because it examined the underlying support for only certain journal entries without having an appropriate rationale for limiting its testing to those certain journal entries. (AS 2401.61) Financial statement audit only | AS 2401.61 |
Issuer M2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Derivatives | During the year the issuer entered into a convertible debt agreement that included an embedded conversion option; the issuer accounted for this option as a derivative liability. The following deficiency was identified: · The issuer engaged a specialist to determine the fair value of this liability at issuance. The firm's approach for substantively testing the fair value of this liability at issuance was to test the issuer's process and the firm used an auditor-employed specialist to evaluate a significant assumption the company's specialist developed using a range of potential assumptions from comparable companies. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because the auditor-employed specialist's procedures were limited to determining that the assumption was among the higher end of the range of potential assumptions. (AS 1105.A8b; AS 1201.C6 and .C7) Financial statement audit only | AS 1105.A8b; AS 1201.C6; AS 1201.C7 | Significant risk |
| 2 | Derivatives | During the year the issuer entered into a convertible debt agreement that included an embedded conversion option; the issuer accounted for this option as a derivative liability. The following deficiency was identified: · The firm did not identify and evaluate misstatements in the financial statements and required disclosures related to this derivative liability. (AS 2810.30 and .31) Financial statement audit only | AS 2810.30; AS 2810.31 | Significant risk |
Issuer N2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Income Taxes | The firm did not identify and test any controls that addressed the risk related to the issuer's compliance with transfer pricing regulations for intercompany transactions. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Income Taxes | The firm did not perform any substantive procedures to evaluate the issuer's assessment of its compliance with transfer-pricing regulations for intercompany transactions. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer O2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | The firm used an auditor-engaged specialist to assist it with evaluating the appropriateness of the issuer's categorization of investments within the fair value hierarchy set forth in FASB ASC Topic 820. The firm identified a difference between the categorization determined by the issuer and determined by the auditor-engaged specialist but did not perform any procedures to evaluate this difference. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Journal Entries | To identify and select journal entries for testing the firm identified fraud characteristics. The firm did not perform any procedures to evaluate whether any of the journal entries recorded in the last month of the year had these characteristics. (AS 2401.61 and .62) Financial statement audit only | AS 2401.61; AS 2401.62 |
Issuer P2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and engaged a specialist to assist it in determining the fair values of certain acquired assets. The firm selected for testing a control that included the issuer's comparison of fair values determined by the company's specialist to fair values included in a separate valuation report received by the issuer. The firm did not identify and test any controls over the reasonableness of the fair values included in the separate valuation report used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Business Combinations | The firm used an auditor-employed specialist to assist it with testing the fair values of these acquired assets which were determined by the company's specialist. The auditor-employed specialist's approach consisted of developing independent expectations consisting of a range of the fair values for a selection of these assets. 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 whether the independent expectations of the fair values as a range encompassed only reasonable outcomes and were supported by sufficient appropriate audit evidence. (AS 1201.C6 and .C7; AS 2501.25) Both financial statement and ICFR audits | AS 1201.C6; AS 1201.C7; AS 2501.25 |
Issuer Q2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recorded revenue net of customer rebates and other deductions. The following deficiency was identified: · The firm selected for testing a control that consisted of the issuer's review of the reconciliation between net revenue and cash receipts. The firm did not evaluate the specific review procedures that the control owner performed to assess certain adjustments between net revenue and cash receipts. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | The issuer recorded revenue net of customer rebates and other deductions. The following deficiency was identified: · The firm did not identify and test any controls over accrued rebates and other deductions. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer R2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm's substantive procedures to test the unit cost of inventory consisted of selecting a sample of items for testing. For certain items selected for testing the firm did not perform sufficient procedures to test the unit cost because it inspected supporting documentation for only a portion of the quantity of these items held at year end. (AS 2301.08) Financial statement audit only | AS 2301.8 | Significant risk |
| 2 | Inventory | The firm used information produced by the issuer in its substantive procedures to test the reserve for excess and obsolete inventory. The firm did not perform any procedures to test or test controls over the accuracy and/or completeness of certain of this information. (AS 1105.10) Financial statement audit only | AS 1105.10 | Significant risk |
Issuer S2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Warrants | The issuer issued warrants that were recorded as liabilities. For certain of these warrants the following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of a significant assumption the issuer used to value these warrants at year end. (AS 2501.16) Financial statement audit only | AS 2501.16 | |
| 2 | Warrants | The issuer issued warrants that were recorded as liabilities. For certain of these warrants the following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate the appropriateness of the issuer's categorization of these warrants within the fair value hierarchy as set forth in FASB ASC Topic 820. (AS 2301.08) Financial statement audit only | AS 2301.8 |
Issuer T2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm selected for testing the issuer's cycle-count control over inventory at certain locations. The firm did not test the aspect of this control that addressed whether all inventory items at these locations were counted during the period. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Inventory | The firm selected for testing the issuer's cycle-count control over inventory at certain locations. The firm did not identify and test any controls that addressed the completeness of certain reports used in the operation of this control. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer U1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Long-Lived Assets | The issuer evaluated certain long-lived assets for possible impairment using significant assumptions it developed based on its planned course of action. The firm's approach for substantively testing the issuer's impairment assessment was to test the issuer's process and the firm used an auditor-employed specialist to evaluate one of these assumptions. 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 a significant difference between this assumption and the issuer's recent experience. Further when evaluating the issuer's ability to carry out its planned course of action the firm performed a sensitivity analysis for this assumption but did not evaluate the significant differences between the alternative assumptions it used in this analysis and the issuer's recent experience. (AS 1201.C6 and .C7; AS 2501.16) Financial statement audit only | AS 1201.C6; AS 1201.C7; AS 2501.16 | Significant risk |
Issuer V1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Journal Entries | To identify and select journal entries for testing the firm identified fraud characteristics and obtained a list of all journal entries with these characteristics. The firm did not perform sufficient procedures to test those journal entries because it examined the underlying support for only certain journal entries without having an appropriate rationale for limiting its testing to those certain journal entries. (AS 2401.61) Financial statement audit only | AS 2401.61 |
Issuer W1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Intangible Assets | The firm did not perform procedures to evaluate certain indicators of potential impairment that existed at year end. (AS 2301.08) Financial statement audit only | AS 2301.8 |
Issuer X1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm did not perform any procedures to test or test controls over the accuracy of certain information produced by the issuer that the firm used in its substantive testing of the reserve for excess and obsolete inventory. (AS 1105.10) Financial statement audit only | AS 1105.10 |
Issuer Y1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For one type of revenue at one business unit the firm did not identify and test any controls over the accuracy of certain order information from the issuer's customer ordering system that the issuer used to record revenue. (AS 2201.39) ICFR audit only | AS 2201.39 |