Roscoe, a public accountant, has completed the examination of the financial statements of Excelsior Corporation as of

Question:

Roscoe, a public accountant, has completed the examination of the of Excelsior as of and for the year ended December 31, 2012. Roscoe also examined and reported on the Excelsior for the prior year. Roscoe drafted the following auditor’s report for 2012:
We have audited the and statements of income and retained earnings of Excelsior as of December 31, 2012.
MANAGEMENT’S RESPONSIBILITY
Management prepared the and is responsible for risk assessment and designing systems of internal control in response to those risks. It also selects and implements the accounting policies embedded in these
AUDITOR RESPONSIBILITY
We were engaged to conduct an audit for the above- mentioned We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the are free of misstatement.
We believe that our audit provides a reasonable basis for our opinion.
OPINION
In our opinion, the referred to above present fairly the financial position of Excelsior as of December 31, 2012, and the results of its operations for the year then ended in conformity with International Financial Reporting Standards, applied on a basis consistent with those of the preceding year.
(Signed)
Roscoe, Public Accountant
OTHER INFORMATION:
• Excelsior is presenting comparative Excelsior does not wish to present a cash flow statement for either year.
• During 2012, Excelsior changed its method of accounting for long-term construction contracts, properly reflected the effect of the change in the current year’s and restated the prior year’s statements. Roscoe is satisfied with Excelsior’s justification for making the change. The change is discussed in footnote 12.
• Roscoe was unable to perform normal confirmation procedures, but alternate procedures were used to satisfy Roscoe as to the existence of the receivables.
• Excelsior is the defendant in a lawsuit, the outcome of which is highly uncertain. If the case is settled in favour of the plaintiff, Excelsior will be required to pay a substantial amount of cash, which might require the sale of certain capital assets. The litigation and the possible effects have been properly disclosed in footnote 11.
• Excelsior issued on January 31, 2012, in the amount of $10,000,000. The funds obtained from the issuance were used to finance the expansion of plant facilities. The debenture agreement restricts the payment of future cash dividends to earnings after December 31, 2013. Excelsior declined to disclose these essential data in the footnotes to the Identify and explain any items included in “Other Information” that need not be part of the auditor’s report.
b. Explain the deficiencies in Roscoe’s auditor’s report as drafted. Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...