An inexperienced staff assistant issues a four-paragraph report on a financial forecast. The first and last paragraphs of the report are shown below.

We have examined the accompanying financial forecast of \(X Y Z\) Company, which includes a forecasted balance sheet as of December 31, 19X1, forecasted statements of income, retained earnings, and changes in financial position for the year then ending. Our study was made in accordance with established guidelines of the American Institute of Certified Public Accountants and, accordingly, included procedures to evaluate the accuracy of the assumptions used by management as a basis for the financial forecast and the presentation of the financial forecast.

In our opinion, the accompanying financial forecast has been prepared using assumptions which form a valid basis for management's forecast and has been presented in conformity with applicable standards established by the American Institute of Certified Public Accountants.

{Required:}

a. List the parts of the report that are in error. Opposite each error indicate the proper report language.

b. Explain the nature and purpose of the two middle paragraphs of the report. (Do not write the middle paragraphs.)