The Board inspected 41 audits at 21 of Grant Thornton's 51 offices. Fifteen issuers were cited in the report that included various failures, primarily related to "obtain[ing] sufficient appropriate audit evidence to support its opinions on the financial statements and on the effectiveness of [internal controls over financial reporting]." There was everything from failure to adequately test IT general controls to sufficiently testing revenue to an entire section - I.A.13 - describing, "Deficiencies in Testing the Fair Value Measurements and Disclosures of Financial Instruments Without Readily Determinable Fair Values" that applied to Issuers H, I, M, N, and O.
The Firm failed to perform sufficient procedures to test the existence of certain inventory. The Firm's procedures to test the existence of inventory that had been consigned to the issuer's customers consisted of testing the issuer's reconciliation of that inventory to reports from the customers. This procedure, however, was insufficient, as the Firm failed to investigate an unreconciled difference that was approximately six times larger than the Firm's established level of materiality. Further, the Firm failed to consider whether the unreconciled difference described above indicated that the amount recorded for estimated consigned sales at year end may not be complete and accurate.