Young & Young, CPAs, completed an examination of the financial statements of XYZ Company, Inc., for the year ended June 30, 2004, and issued a standard unqualified auditor’s report dated August 15, 2004. At the time of the engagement, the board of directors of XYZ requested a special report attesting to the adequacy of the provision for federal and state income taxes and the related accruals and deferred income taxes as presented in the June 30, 2004, financial statements. Young & Young submitted the appropriate special report on August 22, 2004.

Required:

Prepare the special report that Young & Young should have submitted to XYZ Company, Inc.