The following proposed audit report was drafted by a staff accountant at the completion of an engagement and submitted to the engagement partner for review. The partner reviewed the assistant's working papers thoroughly, and concluded that a scope limitation relating to inventory was sufficiently material to warrant a qualified opinion.

To Carl Corporation Controller:

We have audited the accompanying financial statements of Carl Corporation as of December 31, 1999. 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.

We conducted our audit in accordance with generally accepted auditing standards.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 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.

On January 15, 1999, the company issued debentures in the amount of $1,000,000 for the purpose of financing plant expansion. As indicated in Note 6 to the financial statements, the debenture agreement restricts the payment of future cash dividends to earnings after December 31, 2001.
The company's unconsolidated foreign subsidiary did not close down production during the year audited for physical inventory purposes and took no physical inventory during the year. We made extensive tests of book inventory figures for accuracy of calculation and reasonableness of pricing. We did not make physical tests of inventory quantities. Because of this, we are unable to express an unqualified opinion on the financial statements taken as a whole. However, except for the scope limitation regarding inventory, in our opinion the accompanying balance sheet presents the financial position of Carl Corporation at December 31, 1999, subject to the effect of the inventory on the carrying value of the investment. The accompanying statements of income and of retained earnings present the incomes and expenses and the results of transactions affecting retained earnings in accordance with generally accepted accounting principles.
December 31, 1999 Pate & Co., CPAs

Required: 

Identify the deficiencies in the assistant's proposed report.