- Inspection year
- 2024
- Report date
- 25-Jun-2025
- PCAOB release
- 104-2025-106
- Audits reviewed
- 12
- Audits w/ Part I.A deficiencies
- 7
- Part I.A deficiency rate
- 58%
- Part I.A deficiencies
- 24
- Part I.B deficiencies
- 3
- Report
- View PDF ↗
Deficiencies (24)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm's approach for substantively testing the reserve for excess and obsolete (E&O) inventory was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of a significant assumption the issuer used to develop the E&O reserve beyond reading an issuer-prepared memorandum. (AS 2501.16) Unrelated to our review the issuer reevaluated its accounting for its inventory and concluded that material misstatements existed that had not been previously identified. The issuer corrected these misstatements in a restatement of its financial statements in a subsequent filing. Financial statement audit only | AS 2501.16 | |
| 2 | Inventory | The issuer performed cycle counts of the majority of its inventory. The firm did not perform sufficient substantive procedures to test this inventory because the firm did not evaluate the methodology and selection parameters used by the issuer or perform other procedures to determine whether the issuer's cycle-count procedures 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) Financial statement audit only | AS 2510.11 |
Issuer B8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The issuer determined its excess and obsolete (E&O) reserve for certain inventory based in part on a calculation of the amount of this inventory it expected to use to manufacture certain products. The firm did not identify and test any controls over this calculation. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 2 | Inventory | The sample size the firm used in certain of its substantive procedures to test this E&O reserve 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 | Significant risk |
| 3 | Inventory | The firm's approach for substantively testing the E&O reserve was to test the issuer's process. The firm did not sufficiently evaluate the reasonableness of certain significant assumptions the issuer used to develop the E&O reserve because the firm did not perform procedures beyond inquiring of management to evaluate certain significant differences between these assumptions and the issuer's recent experience. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Significant risk |
| 4 | Inventory | The firm did not perform any substantive procedures to test the unit cost of certain categories of inventory. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | Significant risk |
| 5 | Inventory | The issuer held certain inventory at locations owned by external parties. The firm performed confirmation procedures to test the existence of this inventory but did not maintain control over the confirmation requests because the issuer sent the requests. (AS 2310.28) Both financial statement and ICFR audits | AS 2310.28 | Significant risk |
| 6 | Inventory | With respect to certain of the issuer's inventory disclosures the following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of its financial statement disclosures but did not test the aspect of the control that addressed the accuracy and completeness of the issuer-prepared schedules used to prepare these inventory disclosures. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
| 7 | Inventory | With respect to certain of the issuer's inventory disclosures the following deficiencies were identified: · The firm used these issuer-prepared schedules in its substantive testing of these inventory disclosures but did not test or sufficiently test controls over the accuracy and completeness of these schedules. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | Significant risk |
| 8 | Revenue | The firm selected for testing a control that consisted of the issuer's review of a significant assumption used to develop a reserve for certain customer discounts. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of this assumption. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Significant risk |
Issuer C5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The issuer assigned a loan risk rating to its commercial loans. The loan risk rating was an important input in estimating the ACL and determining whether a loan would be individually or collectively evaluated for impairment. The firm did not identify and test any controls over the assignment of the loan risk rating to a certain population of these loans. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | Significant risk |
| 2 | Allowance for Credit/Loan Losses | The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The firm's approach for substantively testing the ACL was to test the issuer's process and the firm used an auditor-employed specialist to evaluate the methods and certain significant assumptions used by the issuer. The firm did not identify that the auditor-employed specialist did not evaluate the reasonableness of the significant assumptions that the issuer used to develop the quantitative and economic reserve components. (AS 1201.C6 and .C7; AS 2501.16) Both financial statement and ICFR audits | AS 1201.C6; AS 1201.C7; AS 2501.16 | Significant risk |
| 3 | Allowance for Credit/Loan Losses | The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The firm's approach for substantively testing the ACL was to test the issuer's process and the firm used an auditor-employed specialist to evaluate the methods and certain significant assumptions used by the issuer. The firm did not evaluate the reasonableness of the significant assumptions related to the qualitative factors that the issuer used to develop the qualitative reserve component. (AS 2501.16) Both financial statement and ICFR audits | AS 2501.16 | Significant risk |
| 4 | Allowance for Credit/Loan Losses | The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The firm did not sufficiently evaluate whether the methods the issuer used to develop the ACL were in conformity with the requirements of GAAP because it did not evaluate whether the issuer's economic reserve component was duplicative of a portion of the qualitative reserve component that also related to economic conditions. (AS 2501.10) Both financial statement and ICFR audits | AS 2501.10 | Significant risk |
| 5 | Allowance for Credit/Loan Losses | The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The firm did not evaluate the relevance of certain external data the issuer used in developing the economic reserve and the qualitative reserve. (AS 1105.04 and .06) Both financial statement and ICFR audits | AS 1105.4; AS 1105.6 | Significant risk |
Issuer D3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deferred Revenue | The firm used certain issuer-produced data in its substantive testing of one type of revenue and the related deferred revenue but did not test or test any controls over the accuracy of these data. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 2 | Deferred Revenue | The firm did not identify and evaluate the issuer's omission of certain required disclosures related to revenue under FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its disclosures related to revenue and determined that certain disclosures were omitted. The issuer did not file an amended Form 10-K or Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected these omissions in a subsequent filing. Financial statement audit only | AS 2810.30; AS 2810.31 | |
| 3 | Payroll Expenses | The firm's substantive procedures to test payroll expenses included performing substantive analytical procedures. The firm used employee headcount information produced by a service organization to develop its expectations but did not evaluate the reliability of this information. (AS 2305.16) Financial statement audit only | AS 2305.16 |
Issuer E4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm's substantive procedures to test two types of revenue included selecting a sample of transactions for testing. The following deficiencies were identified: · For one of these revenue types the issuer recognized revenue for certain of these transactions based on labor hours recorded in the issuer's time system. The firm did not perform procedures to test the appropriateness of the labor hours allocated to these transactions. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 2 | Revenue | The firm's substantive procedures to test two types of revenue included selecting a sample of transactions for testing. The following deficiencies were identified: · For both of these revenue types the firm did not evaluate whether the issuer was acting as a principal or as an agent for these transactions. (AS 2301.08) Financial statement audit only | AS 2301.8 | |
| 3 | Revenue | The firm used various system-generated reports and issuer-prepared schedules in its substantive testing of certain of the issuer's revenue and related disclosures but did not test or test any controls over the accuracy and/or completeness of these reports and schedules. (AS 1105.10) Financial statement audit only | AS 1105.10 | |
| 4 | Pension Liabilities | The issuer provided a company's specialist with certain demographic and employment data that were used to estimate the issuer's projected benefit obligation. The firm did not perform sufficient procedures to test the accuracy and completeness of these data because it (1) did not test the accuracy of certain important data attributes for the participants selected for testing and (2) limited its completeness procedures to testing whether certain participants were appropriately removed from the data. (AS 1105.A8a) Financial statement audit only | AS 1105.A8a |
Issuer F1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm's internal inspection program had inspected this audit and reviewed this area but did not identify the deficiency below. The firm used issuer-prepared schedules in its substantive testing of certain revenue disclosures but did not perform procedures to test or test any controls over the accuracy and/or completeness of these schedules. (AS 1105.10) Financial statement audit only | AS 1105.10 |
Issuer G1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm's substantive procedures to test revenue included performing substantive analytical procedures. The firm used certain issuer-produced production volume data to develop its expectations but did not sufficiently test or test any controls over the accuracy and completeness of the production volume data because the firm's procedures were limited to comparing the production volume data to other issuer-produced data which were used to derive revenue. (AS 2305.16) Financial statement audit only | AS 2305.16 |