On completion of fieldwork on September 23, 19X5, the following standard report was rendered by Timothy Ross to the directors of The Rancho Corporation.

{Report of Independent Auditors}

To the Directors of The Rancho Corporation:

We have audited the balance sheet and the related statement of income and retained earnings of The Rancho Corporation as of July 31, 19X5. In accordance with your instructions, a complete audit was conducted.

We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain adequate assurance about whether the financial statements are free of errors and fraud. An audit includes examining, on a test basis, evidence supporting the amounts in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In many respects, this was an unusual year for The Rancho Corporation. The weakening of the economy in the early part of the year and the strike of plant employees in the summer of \(19 \times 5\) led to a decline in sales and net income. After making several tests of sales records, nothing came to our attention that would indicate that sales have not been properly recorded.

In our opinion, with the explanation given above, and with the exception of some minor errors that are considered immaterial, the aforementioned financial statements present fairly the financial position of The Rancho Corporation at July 31, 19X5, and the results of its operations for the year then ended, in conformity with pronouncements of the Financial Accounting Standards Board.

Required:
List and explain deficiencies and omissions in the auditor's report. The type of opinion (unqualified, qualified, adverse, or disclaimer) is of no consequence and need not be discussed.
Organize your answer sheet by paragraph (opening, scope, explanatory, and opinion) of the auditor's report.