Pcaob assignment PDF

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This document contains the PCAOB assignment. I received an A....

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ACCT:4100 Auditing PCAOB Assignment Fall 2020 Assignment PCAOB Inspection Report of KPMG: Article 3 from the September 3 class discussed the PCAOB’s 2017 inspection report of KPMG audits. This assignment is based on the PCAOB’s 2018 inspection report of KPMG that was issued on April 28, 2020: https://pcaobus.org/Inspections/Reports/Documents/104-2020-011-KPMG-LLP.pdf. The Executive Summary provides the following information:  19 of 52 KPMG audits inspected by the PCAOB are included in Part 1.A, meaning that sufficient and appropriate audit evidence had not been obtained.  Breakdown of these 19 deficiencies by audit type (ICFR, financial statement, or both): 14 both financial statement and ICFR, 4 ICFR only, 1 financial statement only Required: Refer to the specific audit deficiencies described for Issuer C – Communication Services on page 15 of the inspection report. Revenue and Accounts Receivable accounts 1. Summarize the deficiencies in tests of controls. KPMG did not correctly test controls to make sure that they met GAAP standards. KPMG did not test the client controls to make sure that the actual revenue amount collected, and the revenue amount recorded with controls matched. KPMG failed to follow the controls all the way through. They did not check to make sure that accounts with issues or uncollected revenue were resolved by the controls, so those issues could have still existed by the end of the audit. KPMG also did not test the controls that the company used to make sure that no invoice needed investigation. Therefore, they could have missed some of the problematic invoices managed by those controls. 2. Summarize the deficiency in substantive procedures. KPMG did not use large enough sample sizes to be reasonably assured that accounts were materially correct considering the failed testing of controls. KPMG relied too

heavily on controls during their substantive testing. Therefore, the account balances could have been materially misstated because not enough samples were tested in their substantive procedures. Unbilled Accounts Receivable, Advanced Billings, and Deferred Revenue accounts 1. Summarize the deficiency in tests of controls. KPMG only performed testing of controls over the billing system but failed to test whether the transactions were correct or not. Therefore, although KPMG confirmed that the billing system worked, they did not confirm that the amounts recorded within the system were accurate. This is a deficiency because the billing system could have incorrect transaction data. 2. Summarize the deficiency in substantive procedures. KPMG used data from the billing system to perform their substantive audit. Because those controls were inadequately tested, the substantive procedures were not enough to prove that accounts were materially correct. KPMG should have done more substantive testing because of their lack of control testing. KPMG relied on controls to create their threshold for materiality of balance differences, which was a deficiency considering the controls were not thoroughly tested. Therefore, the substantive procedures could have missed material misstatements since the materiality threshold was determined by inadequate controls testing....