Audit Report Deficiencies: Audits of Group Financial Statements and Other Operating Matters. Following is Rex Wolf’s report on Bonair Corporation’s financial statements. Bonair publishes general- purpose financial statements for distribution to owners, creditors, potential investors, and the general public.

Independent Auditor’s Report

To the Board of Directors and Shareholders of Bonair Corporation

We have audited the accompanying financial statements of Bonair Corporation, which comprise the balance sheet as of December 31, 2014, and the related statements of income, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We did not examine the financial statements of Caet Company, a wholly- owned subsidiary. Those statements were audited by Nero Stout, CPA, whose report has been furnished to us, and our opinion insofar as it relates to the amounts included for Caet Company, is based solely on the report of other auditors. With the exception of this matter, we conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, 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.

Opinion

In our opinion, except for the matter of the report of the component auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Bonair Corporation as of December 31, 2014, and the results of its operations and its cash flows for the year then ended.

Other Matter

As noted in the Auditor's Responsibility section of this report, Nero Stout, CPA, audited the financial statements of Caet Company, a wholly- owned subsidiary.

Required:

Describe the reporting deficiencies and explain why they are considered deficiencies. Organize your response according to each of the paragraphs or sections in the standard.