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Deloitte s failed in auditing Jack Henry s recognition of software license revenue from multiple - element software arrangements. Deloitte s engagement teams planned and
Deloittes failed in auditing Jack Henrys recognition of software license revenue from multipleelement 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 FY and FY 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: improperly separate contracts so closely related that they should have been considered to be parts of a single arrangement; an prematurely recognized revenue from sales of software given it lack of vendorspecific objective evidence VSOE of the fair value of undelivered services related to implementation and postcontract support. JKHYs failures in these areas were caused by inadequate internal control surrounding revenue recognition. INTERNAL CONTROL DEFICIENCIES
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