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Ascent Raises Doubt Over Existence & Accuracy of Sales Contracts
Pipe maker inserts new language to revenue recognition control deficiency disclosure as bad receivables spike.
April 13, 2023
Ascent Industries (ACNT), a maker of industrial tubular products and specialty chemicals, needed extra time to compile and analyze supporting documentation for its financial statements and thus belatedly filed its annual report. Two weeks later, when Ascent filed, the report revealed a significant spike in bad debt.
Specifically, Ascent’s bad receivables loss provision increased to $1.4 million, or 2,166% year-over-year (YoY). The allowance balance spiked 578% YoY, or 2.7% of receivables, up from 0.4% the previous year.
The spike in bad receivables coincides with new language related to a previously disclosed revenue recognition control deficiency. Previously, Ascent has acknowledged not maintaining effective controls over recorded revenue.
Now the company has raised doubts about the existence and accuracy related to the “review of sales contracts”:
“Management did not maintain effectively designed and implemented controls over recorded revenue and accounts receivable, including procedures over the existence and accuracy of data input for price and quantity, review of sales contracts, as well as appropriate allocation of transaction price across identified performance obligations within the Company's contracts with customers.”
New language in the latest annual report also indicates newly found control deficiencies related to complex accounting and information technology.
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