Steam Clean, Inc., produces unique washing machines under a license agreement with Tom Nessinger, who invented the unique process. Nessinger has engaged you to audit the sales of Steam Clean, Inc., which are the basis for royalty payments to him. (He is to be paid \(\$ 10\) for each washing machine sold.)

During your audit, you find that the sales amount on which Nessinger was paid excludes (1) 15 units for which the sales prices were never collected (written off as bad debts), (2) 17 units that were returned because of defects, (3) 21 units sold at a reduced price as demonstrators, (4) 106 units manufactured and sold by a foreign subsidiary, and (5) 57 units that were modified slightly from the original design. Nessinger disputes the exclusion of all of these units from sales on which royalty payments were made.

Discuss and draft the form of audit report you would issue in this case.