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Deloitte & Touche LLP and Jack Henry & Associates, Inc.PURPOSE: $$Learn how Deloitte violated PCAOB standards in its Integrated Audits of Jack Henry and Jack Henrys inadequate internal control over revenue recognition.SUMMARY: $$Deloittes failed in auditing Jack Henrys recognition of software license revenue from multiple$-$element software arrangements. $$Deloittes engagement teams planned and performed audit procedures intended to address the significant risks associated with software license revenue. $$As executed, however, those procedures did not adequately address certain of the identified and assessed risks of material misstatement. $$As a result, the engagement teams failed to$,$ among other things, obtain sufficient appropriate evidence to support the Firms unqualified opinions on Jack Henrys financial statements and managements assessments of the effectiveness of internal control over financial reporting $($ICFR$)$ in the FY$14$ FY $13$ and FY $12$ audits. $$The engagement teams also failed to exercise the requisite due professional care and professional skepticism in those audits.Jack Henry $($JKHY$)$ failed to properly record and report revenue from its software license sales in the correct accounting periods because it: $(1)$ improperly separate contracts so closely related that they should have been considered to be parts of a single arrangement; an $(2)$ prematurely recognized revenue from sales of software given it lack of vendor$-$specific objective evidence $($VSOE$)$ of the fair value of undelivered services related to implementation and post$-$contract support. $$JKHYs failures in these areas were caused by inadequate internal control surrounding revenue recognition.Name:DELOITTE & TOUCHE LLP$1.$ RISKS:$$a$.$ SIGNIFICANT RISK$$b$.$ FRAUD RISK$(1)$ Professional skepticism and audit evidence.$(2)$ Assigning personnel and supervision.$(3)$ Accounting principles.$2.$ RELEVANT ASSERTION & LINKAGE$3.$ RISK OF MATERIAL MISSTATEMENT NOT SATISFIEDa.b$.(1)$ Insufficient License Revenue Contract Testing$(2)$ Insufficient Testing of VSOE for PCS$(3)$ Insufficient Testing of VSOE for Implementation$4.$ QUALITY CONTROL$5.$ PROFESSIONAL SKEPTICISM IN AUDITSAPPENDIX B $($continued$)$JACK HENRY & ASSOCIATES, INC.$1.$ INTERNAL CONTROL DEFICIENCIES$2.$ INTERNAL CONTROL OVER FINANCIAL REPORTING CONTROL ENVIRONMENT RISK ASSESSMENTINFORMATION & COMMUNICATIONACCOUNTING INFORMATION SYSTEM CONTROL ACTIVITIES MONITORING$3.$ OPERATIONALIZE REMEDIATION STEPS$4.$ DISCUSS SIMILARITIES$$

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