- Inspection year
- 2023
- Report date
- 28-Apr-2025
- PCAOB release
- 104-2025-065
- Audits reviewed
- 3
- Audits w/ Part I.A deficiencies
- 3
- Part I.A deficiency rate
- 100%
- Part I.A deficiencies
- 15
- Part I.B deficiencies
- 6
- 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 A8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer used an information technology (IT) system to process certain revenue transactions under multiple revenue recognition scenarios. To reduce the extent of its substantive procedures for this revenue the firm tested and placed reliance on certain IT general controls (ITGCs). The following deficiencies were identified: · The firm selected for testing a change management control over this IT system that consisted of the testing and approval of system changes prior to their migration into the production environment. The issuer documented system changes in tickets that were entered into a change ticket tracking system. The firm did not perform sufficient procedures to test or test any controls over the completeness of the population of changes from which it made its selections for testing this control because it limited its procedures to obtaining a list of change tickets from the change ticket tracking system without performing procedures to determine if there were changes that were not captured in that system. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 2 | Revenue | The issuer used an information technology (IT) system to process certain revenue transactions under multiple revenue recognition scenarios. To reduce the extent of its substantive procedures for this revenue the firm tested and placed reliance on certain IT general controls (ITGCs). The following deficiencies were identified: · The firm selected for testing another change management control over this IT system that consisted of the restriction of access to migrate system changes from the development environment into the production environment. The firm did not identify and evaluate a control design deficiency related to certain IT users that had the ability to develop system changes and migrate system changes from the development environment into the production environment. (AS 2301.19) Financial statement audit only | AS 2301.19 | |
| 3 | Revenue | The issuer used an information technology (IT) system to process certain revenue transactions under multiple revenue recognition scenarios. To reduce the extent of its substantive procedures for this revenue the firm tested and placed reliance on certain IT general controls (ITGCs). The following deficiencies were identified: · The firm did not perform sufficient procedures to test this revenue because it did not test (1) whether this IT system appropriately processed this revenue under each of the revenue recognition scenarios and (2) the inputs used in determining the revenue recognized. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 4 | Revenue | The issuer used an information technology (IT) system to process certain revenue transactions under multiple revenue recognition scenarios. To reduce the extent of its substantive procedures for this revenue the firm tested and placed reliance on certain IT general controls (ITGCs). The firm did not perform procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data that it used to substantively test this revenue and certain other revenue. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 5 | Goodwill and Intangible Assets | The issuer evaluated goodwill and intangible assets for impairment for one reporting unit using a discounted cash flow model (“DCF model”) which was developed using various assumptions. The following deficiency was identified: · The firm did not perform any procedures to evaluate the reasonableness of the significant assumptions related to forecasted operating expenses used by the issuer in its goodwill and intangible assets impairment analysis. (AS 2501.16) Financial statement audit only | AS 2501.16 | Significant risk |
| 6 | Goodwill and Intangible Assets | The issuer evaluated goodwill and intangible assets for impairment for one reporting unit using a discounted cash flow model (“DCF model”) which was developed using various assumptions. The following deficiency was identified: · The firm did not perform sufficient procedures to evaluate the reasonableness of the significant assumptions related to forecasted revenue used by the issuer in its goodwill and intangible assets impairment analysis as it limited its procedures to recalculating the compounded annual growth rate (CAGR) for revenue based on projected financial information and comparing it to the CAGR for the industry without evaluating the projected financial information. Further the firm did not evaluate the difference between the recalculated CAGR and the CAGR for the industry. (AS 2501.16) Financial statement audit only | AS 2501.16 | Significant risk |
| 7 | Fraud Considerations | Certain users of the issuer's accounting system were identified as having the ability to create and approve manual journal entries. The firm did not identify and select journal entries for testing or perform other audit procedures to specifically address this risk. (AS 2301.08; AS 2401.61) Financial statement audit only | AS 2301.8; AS 2401.61 | |
| 8 | Journal Entries | The firm identified certain fraud criteria and obtained a listing of all journal entries that met the criteria. The firm did not examine the underlying support for the entries and instead limited its procedures to reading the journal entry descriptions. (AS 2401.61) Financial statement audit only | AS 2401.61 |
Issuer B4 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 certain of the deficiencies below. The firm was instructed by the principal auditor to perform certain procedures to test revenue including (1) analyzing the amount of inventory held by distributors at year-end (2) testing cash disbursements to distributors and (3) agreeing revenue transactions to cash receipts. The firm did not perform procedures (1) and (3) and for (2) limited its testing of cash disbursements to distributors to those made subsequent to year-end. (AS 2301.08 and .13) Both financial statement and ICFR audits | AS 2301.8; AS 2301.13 | |
| 2 | Inventory | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm did not identify and test any controls over certain inventory. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Inventory | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm did not perform sufficient procedures to test this inventory as it limited its procedures to (1) confirming the balance with the principal auditor and (2) reconciling the balance to the general ledger. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 4 | Journal Entries | The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm was instructed by the principal auditor to test any unusual cost of sales journal entries. The firm did not perform any procedures to identify and test any unusual cost of sales journal entries. (AS 2401.61) Both financial statement and ICFR audits | AS 2401.61 |
Issuer C3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Fraud Considerations | The firm identified a fraud risk related to users of the issuer's accounting system having the ability to create and approve manual journal entries. The firm did not identify and select journal entries for testing or perform other audit procedures to address this risk. (AS 2301.08 and .13; AS 2401.61) Financial statement audit only | AS 2301.8; AS 2301.13; AS 2401.61 | |
| 2 | Journal Entries | For one component the firm did not identify and select manual journal entries for testing or perform other audit procedures to specifically address the identified risk related to expenses being recorded in the incorrect accounting period. (AS 2301.08 and .13; AS 2401.61) Financial statement audit only | AS 2301.8; AS 2301.13; AS 2401.61 | |
| 3 | Journal Entries | For another component the firm identified certain fraud criteria for journal entries and obtained a listing of all journal entries that met the criteria. The firm did not perform sufficient procedures to test those journal entries because it limited its procedures to certain journal entries without having an appropriate rationale for limiting its procedures to those journal entries. Further the firm did not examine the underlying support for certain of the selected journal entries. (AS 2401.61) Financial statement audit only | AS 2401.61 |