Roscoe, a public accountant, has completed the examination of the financial statements of Excelsior Corporation as of and for the year ended December 31, 2020. Roscoe also examined and reported on the Excelsior financial statements for the prior year.

REQUIRED
Review the following facts and explain the impact on the auditor’s report.
• Excelsior is presenting comparative financial statements
• Excelsior prepares an annual report for its investors
• Excelsior does not wish to present a cash flow statement for either year
• During 2020, Excelsior changed its method of accounting for long-term construction contracts, properly reflected the effect of the change in the current year’s financial statements, 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 accounts receivable confirmation procedures, but alternative procedures were used to satisfy Roscoe as to the existence of the receivables.
• Excelsior Corporation 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 property, plant, and equipment. The litigation and the possible effects have been properly disclosed in footnote 11.
• Excelsior issued debentures on January 31, 2020, 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, 2021. Excelsior declined to disclose these essential data in the footnotes to the financial statements.