01 Jul audit report
The following auditor’s report was drafted by a staff accountant of Paul and Paul, CPAs, at the completion of the audit of the comparative financial statements of ABC Partnership for the years ended December 31, 2017 and 2016. ABC is a privately held company that prepares its financial statements on the income tax basis of accounting. The report was submitted to the engagement partner, who reviewed matters thoroughly and properly concluded that an unmodified opinion should be expressed. The draft of the report prepared by an inexperienced staff auditor is as follows:
We have audited the accompanying financial statements of ABC Partnership, which comprise the statements of assets, liabilities, and capital–income tax basis as of December 31, 2017, and the related statements of revenue and expenses–income tax basis and of changes in partners’ capital accounts–income tax basis for the year then ended, and the related notes to the financial statements.
We conducted our audit in accordance with standards established by the AICPA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and capital of ABC Partnership as of December 31, 2017, and its revenue and expenses and changes in partners’ capital accounts for the year then ended in conformity with generally accepted accounting principles applied on a consistent basis.
Basis of Accounting
We draw attention to Note 2 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the basis of accounting the Partnership uses for income tax purposes. Accordingly, these financial statements are not designed for those who do not have access to the Partnership’s tax returns. Our opinion is not modified with respect to this matter.
Paul and Paul, CPAs
April 3, 2018
Identify the errors and omissions in the auditor’s report as drafted by the staff auditor. Group the errors and omissions by paragraph, where applicable. Do not redraft the report.
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