The following audit report was drafted by a staff accountant and submitted to the engagement partner in the accounting firm of Better & Best, CPAs:

To the Audit Committee of American Widgets, Inc.:

We have audited the consolidated balance sheets of American Widgets, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. Other auditors examined the financial statements of certain subsidiaries and have furnished us with reports thereon containing no exceptions. Our opinion expressed herein, insofar as it relates to the amounts included for those subsidiaries, is based solely upon the reports of the other auditors.

As discussed in Note 4 to the financial statements, on January 8, 2000, the company halted the production of certain medical equipment as a result of inquiries by the Food and Drug Administration, which raised questions as to the adequacy of some of the Company's sterilization equipment and related procedures. Management is not in a position to evaluate the effect of this production halt and the ensuing litigation, which may have an adverse effect on the financial position of American Widgets, Inc.

As fully discussed in Note 7 to the financial statements, in 1999 the Company extended the use of the last-in, first-out (LIFO) method of accounting to include all inventories.

In examining inventories, we engaged Dr. Irwin Same (Nobel Prize winner, 1992) to test check the technical requirements and specifications of certain items of equipment manufactured by the Company.

In our opinion, except for the effects, if any, on the financial statements of the ultimate resolution of the matter discussed in the second preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of American Widgets, Inc. as of December 31, 1999, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.

To be signed by Better & Best, CPAs March 1, 2000, except for Note 4 as to which the date is January 8, 2000

Required: 

Identify the deficiencies in the assistant's proposed report.