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Deloitte Touche Tohmatsu Certified Public Accountants LLP
China · Deloitte Touche Tohmatsu Limited · Triennially Inspected
- Inspection year
- 2023
- Report date
- 23-May-2024
- PCAOB release
- 104-2024-080
- Audits reviewed
- 4
- Audits w/ Part I.A deficiencies
- 3
- Part I.A deficiency rate
- 75%
- Part I.A deficiencies
- 23
- Part I.B deficiencies
- 5
- Report
- View PDF ↗
Deficiencies (23)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A11 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: • The firm did not identify and test any controls over the satisfaction of a performance obligation which determined the point in time in which the related revenue should be recognized. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review and approval of certain revenue-related transactions. The firm did not identify and test any controls over the accuracy and completeness of certain system-generated data used in the operation of the control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: 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 | |
| 4 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing controls over certain revenue and related accounts that consisted of the configuration of certain IT systems to automatically (1) update the order status (2) calculate and allocate revenue and (3) update order payment information. The firm used a “test of one” approach to test these controls but did not perform procedures beyond inquiry to evaluate whether the tested configurations were applied consistently across each processing alternative to support the use of such an approach. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 5 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review of the revenue recognition system logic. 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 | |
| 6 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review and approval of a revenue-related calculation. As a result of the deficiencies in the firm's testing of certain controls discussed above the firm did not perform sufficient procedures to test the accuracy and completeness of certain information used in the operation of this control. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 7 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm did not perform procedures to test or test any controls over the completeness and/or accuracy of certain system-generated data used in its substantive testing of revenue and related accounts. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 8 | Revenue and Related Accounts | The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: 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 | |
| 9 | Variable Interest Entities | The issuer derives revenue through a consolidated variable interest entity and its subsidiaries (“VIE”) and relies on contractual arrangements with the VIE and its shareholders to control the business operations of the consolidated VIE. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIE including the validity and enforceability of contractual arrangements with the VIE and its shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiency was identified: • The firm did not identify and test any controls over the issuer's review of the legal opinion prepared by the company's specialist which described uncertainties regarding the interpretation and application of current laws and regulations related to the structure of the VIE and evaluation of the effect of such uncertainties on its ability to consolidate the VIE. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 10 | Variable Interest Entities | The issuer derives revenue through a consolidated variable interest entity and its subsidiaries (“VIE”) and relies on contractual arrangements with the VIE and its shareholders to control the business operations of the consolidated VIE. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIE including the validity and enforceability of contractual arrangements with the VIE and its shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiency was identified: • The firm did not sufficiently evaluate the relevance and reliability of the work performed by the company's specialist and whether the specialist's findings support or contradict the issuer's rights and obligations related to the consolidation of the VIE because it did not (1) evaluate the nature of the uncertainties described in the legal opinion prepared by the company's specialist (2) evaluate the effect of a restriction included in the legal opinion prepared by the company's specialist on the use of the opinion and (3) perform additional procedures to address the risks associated with those uncertainties and the effect of the restriction. (AS 1105.A9 and .A10) Both financial statement and ICFR audits | AS 1105.A10; AS 1105.A9 | |
| 11 | Short-term Investments | The firm selected for testing a control over short-term investments that consisted of the issuer's review of the fair value calculation of the investments including the expected rate of return. 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 |
Issuer B11 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The issuer used multiple IT systems to initiate process and report transactions related to certain revenue and related accounts 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 certain of these IT systems. As a result of the following 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 | Inventory | With respect to change management: • The firm selected for testing change management controls that consisted of management's review and approval of requests for access including privileged-level access to application data files and databases. The firm did not however identify and test any controls over the appropriateness of changes made directly to the financial data within such application data files and databases. (AS 2201.39) Both financial statement and ICFR audits | AS 1105.10; AS 2201.39 | |
| 3 | Inventory | With respect to change management: • The firm selected for testing another change management control that consisted of the testing and approval of changes made to the structure of databases and relationships between data prior to their migration into the production environment. The firm did not perform procedures to test or test any controls over the completeness of the population of changes from which it made its selections to test this control. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10; AS 2201.39 | |
| 4 | Inventory | As a result of the firm's ITGC testing deficiencies discussed above the firm did not perform sufficient substantive procedures as follows: • The sample sizes the firm used in certain of its substantive procedures to test 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 | |
| 5 | Inventory | As a result of the firm's ITGC testing deficiencies discussed above the firm did not perform sufficient substantive procedures as follows: • The firm used certain system-generated data to substantively test revenue and related accounts and inventory but did not test or (as discussed above) sufficiently test controls over the accuracy and completeness of this data. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 6 | Inventory | As a result of the firm's ITGC testing deficiencies discussed above the firm did not perform sufficient substantive procedures as follows: • The firm performed substantive analytical procedures as part of its testing of certain revenue. The firm used certain system-generated data to develop its expectations but did not test or (as discussed above) sufficiently test controls over the accuracy and completeness of this data. (AS 2305.16) Both financial statement and ICFR audits | AS 2305.16 | |
| 7 | Inventory | The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm selected for testing controls over inventory that consisted of the configuration of the IT system to automatically (1) calculate daily inventory cycle count tasks and (2) verify inventory receipts and shipments. The firm did not test the design and operating effectiveness of these controls in instances of the legacy (or unmodified) version of the IT system or perform procedures beyond inquiry to evaluate whether the tested configurations were consistently designed and applied in all instances across the system. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 8 | Inventory | The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm selected for testing an IT-dependent manual control over inventory that consisted of the performance of periodic cycle counts which used information generated by one of the automated controls discussed above. The accuracy and completeness of this information depended on the effective operation of this automated control. As a result of the deficiency in the firm's testing of this automated control as discussed above the firm's testing of this IT- dependent manual control was not sufficient. (AS 2201.46) Both financial statement and ICFR audits | AS 2201.46 | |
| 9 | Inventory | The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm did not obtain sufficient appropriate audit evidence with regard to the issuer's inventory cycle-count procedures over certain inventory. Specifically as a result of the deficiencies in the firm's testing of the automated and IT-dependent manual controls as 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 during the year. (AS 2510.11) Both financial statement and ICFR audits | AS 2510.11 | |
| 10 | Variable Interest Entities | The issuer derives revenue through consolidated VIEs including their subsidiaries and relies on contractual arrangements with the VIEs and their shareholders to control the business operations of the consolidated VIEs. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIEs including the validity and enforceability of contractual arrangements with the VIEs and their shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiencies were identified: • The firm did not identify and test any controls over the issuer's review of the legal opinion prepared by the company's specialist which described uncertainties regarding the interpretation and application of current laws and regulations related to the structure of the VIEs and evaluation of the effect of such uncertainties on its ability to consolidate the VIEs. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 11 | Variable Interest Entities | The issuer derives revenue through consolidated VIEs including their subsidiaries and relies on contractual arrangements with the VIEs and their shareholders to control the business operations of the consolidated VIEs. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIEs including the validity and enforceability of contractual arrangements with the VIEs and their shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiencies were identified: • The firm did not sufficiently evaluate the relevance and reliability of the work performed by the company's specialist and whether the specialist's findings support or contradict the issuer's rights and obligations related to the consolidation of the VIEs because it did not evaluate the nature of the uncertainties described in the legal opinion prepared by the company's specialist and perform additional procedures to address the risks associated with those uncertainties. (AS 1105.A9 and .A10) Both financial statement and ICFR audits | AS 1105.A10; AS 1105.A9 |
Issuer C1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a control over certain revenue that consisted of the issuer's review of an accounting analysis to ensure that revenue was appropriately recognized. 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) ICFR audit only | AS 2201.42; AS 2201.44 |