The following draft of an auditor's report has been submitted for review:

To: Eric Jones, Chief Accountant Sunshine Manufacturing Co.

We have examined the balance sheet of the Sunshine Manufacturing Co. for the year ended August 31, 19X0 and the related statements of income, retained earnings and changes in financial position. Our examination included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances except that, in accordance with your instructions, we did not count the buyers' cash working fund. In our opinion, subject to the limitation on our examination discussed above, the accompanying balance sheet and statements of income, earned surplus, and changes in financial position present fairly the financial position of the Sunshine Manufacturing Co. at August 31, 19X0, and the results of its operations for the year then ended.

August \(31,19 \times 0\)
It has been determined that 1. Except for the ormission of the count of the buyers' cash working fund, there were no scope restrictions placed on the auditor's examination.
2. The Sunshine Manufacturing Company has been in continuous operation for a number of years, but its financial statements have not previously been audited.
Required:

a. Assuming that Frank George \& Company was able to perform alternative auditing procedures to satisfactorily substantiate the buyers' cash working fund and purchases through the fund, identify and discuss the deficiencies in the auditor's report.

b. Assuming that Frank George \& Company was unable to satisfactorily substantiate the buyers' cash working fund and purchases through the fund by alternative auditing procedures, discuss the appropriateness of the opinion qualification proposed by Frank George's report.

c. Discuss the potential consequences to the CPA of issuing a substandard report or failing to adhere in his examination to GAAS.