Chapter $3$ Audit Reports

$3-1$ Interpreting an Audit Report

Below is Deloitte & Touche's January $30,2003,$ audit report for The Dow Chemical

Company:

To the Stockholders and Board of Directors of The Dow Chemical Company:

We have audited the accompanying consolidated balance sheets of The Dow Chemical Company and its subsidiaries as of December $31,2002,$ and $2001,$ and the related consolidated statements of income, stockholders' equity, comprehensive income, and cash flows for each of the three years in the period ended December $31,2002.$ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of The Dow Chemical Company and Union Carbide Corporation, which has been accounted for as a pooling of interests as described in Note C to the consolidated financial statements. We did not audit the statements of income, stockholders' equity, and cash flows of Union Carbide Corporation for the period ended December $31,2000,$ which consolidated statements reflect total revenues of $$6,550$ million. Those consolidated statements were audited by other auditors whose report has been furnished to us$,$ and our opinion, insofar as it relates to the amounts included for Union Carbide Corporation for $2000,$ is based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Dow Chemical Company and its subsidiaries at December $31,2002$ and $2001,$ and the results of their operations and their cash flows for each of the three years in the period ended December $31,2002,$ in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes A and H to the consolidated financial statements, effective January $1,2001,$ The Dow Chemical Company changed its method of accounting for derivative instruments and hedging activities to conform to Statement of Financial Accounting Standards No$.133.$

As discussed in Notes A and F to the consolidated financial statements, effective January $1,2002,$ The Dow Chemical Company changed its method of accounting for goodwill to con$$ form to Statements of Financial Accounting Standards Nos. $141$ and $142.$

Deloitte & Touche LLP

Midland, Michigan

January $30,2003$

Required:

$1.$ What type of opinion did Deloitte & Touche issue?

$2.$ Using Figure $3-6$ as a guide, explain how the report departs from the wording of a standard report.