Question

18-28 The following auditor's report was drafted by a staff accountant of Nathan and Mat- thew, CPAs, at the completion of the audit of the comparative financial statements of Monterey for the years ended December 31, 2018 and 2017. The report was sub- mitted 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: Auditor's Report We have audited the accompanying financial statements of Monterey, which com- prise the statements of assets, liabilities, and capital as of December 31, 2018, and

Answer 1

Below are the errors and omissions in the Audit Report:

• "Independent" is omitted from the title of the auditors' report.

Auditor’s responsibility paragraph:

• The auditor’s responsibility to express an opinion on the financial statements is omitted.
• Another omission was that of Generally Accepted Auditing Standards.

Management’s responsibility paragraph:

• This paragraph was completely omitted.

Opinion paragraph:

• No reference to Consistency should be mentioned unless the accounting principles have not been applied consistently.

Scope paragraph:

• It is not mentioned that the auditor considers internal control in making risk assessments and in designing appropriate audit procedures.
• Reference to “significant estimates made by management” is omitted.