Below is a draft of the paragraph for a modified review report. Some words or phrases have been

replaced with numbers (e.g., [1], [2], etc.). Select from the option list provided the appropriate

word or phrase for each of the numbers in the draft report. Each choice may be used once, more

than once, or not at all.

a. accounting principles generally accepted

b. cash flows.

c. Except for

d. Express such an opinion.

e. Generally accepted government auditing standards

f. Management.

g. generally accepted auditing standards

h. material misstatements.

i. inquiries of company management.

j. reasonable assurance

k. in note X to these financial statements

l. reasonable assurance

m. the AICPA

We have reviewed the accompanying financial statements of XYZ Company, which comprise

the balance sheet as of December 31, Year 1, and the related statements of income, changes in

stockholders' equity, and cash flows for the year then ended, and the related notes to the financial

statements. A review includes primarily applying analytical procedures to management's

financial data and making _____[1]_____. A review is substantially less in scope than an audit,

the objective of which is the expression of an opinion regarding the financial statements as a

whole. Accordingly, we do not _____[2]_____.

Management's Responsibility for the Financial Statements

_____[3]_____ is responsible for the preparation and fair presentation of these financial

statements in accordance with accounting principles generally accepted in the United States of

America; this includes the design, implementation, and maintenance of internal control relevant

to the preparation and fair presentation of financial statements that are free from material

misstatement whether due to fraud or error.

Accountant's Responsibility

Our responsibility is to conduct the review engagement in accordance with Statements on

Standards for Accounting and Review Services promulgated by the Accounting and Review

Services Committee of _____[4]_____. Those standards require us to perform procedures to

obtain limited assurance as a basis for reporting whether we are aware of any material

modifications that should be made to the financial statements for them to be in accordance with

accounting principles generally accepted in the United States of America. We believe that the

results of our procedures provide a reasonable basis for our conclusion.

Basis for Qualified Conclusion

As disclosed _____[5]_____, accounting principles generally accepted in the United States of America require that inventory cost consist of material, labor, and overhead. Management has informed us that the inventory of finished goods and work-in-process is stated in the accompanying financial statements as material and labor cost only and that the effects of this departure from accounting principles generally accepted in the United States of America on financial position, results of operations, and _____[6]_____ have not been determined.

Accountant's Qualified Conclusion

Based on our review, _____[7]_____ the issue described in the Known Departure from

Accounting Principles Generally Accepted in the Unites States of America paragraph, we are not

aware of any material modifications that should be made to the accompanying financial

statements in order for them to be in accordance with _____[8]_____ in the United States of America.

Item	Word or Phrase
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8