For any items that you answer "No" to in the "Needed in Auditor's Report?" column, select the letter corresponding to the explanation (from the list provided) as to why the item is not needed. If you select "Yes" to identify an item that is needed in the auditor's report, select "n/a" in the explanation column.

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(Click the icon to view the list of possible explanations for why an item might not be needed in the auditor's report.)

		Needed in Auditor's Report?	Explanation if not needed in report
	Bellamy is a private corporation and is presenting comparative financial statements.	No	a. b. c. d. e. n/a

Part 2

During 2019, Bellamy acquired Stockard Inc. and the effects of that transaction are reflected in the current year financial statements. Information about this transaction is disclosed in footnote 12.

Yes No

a. b. c. d. e. n/a

Part 3

Patel was unable to perform normal accounts receivable confirmation procedures for accounts that are material, but not pervasive, to the financial statements. Unfortunately, Patel was not able to perform alternative procedures to support the existence of the receivables.

Yes No

a. b. c. d. e. n/a

Part 4

Bellamy Corporation is the defendant in litigation where there is a reasonable possibility that Bellamy may be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. Because management does not want to provide any information that the plaintiff might use against Bellamy, the case is not discussed in the financial statements

Yes No

a. b. c. d. e. n/a

Part 5

Bellamy issued debentures on January 31, 2018, in the amount of $10 million. 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, 2023. Bellamy has disclosed this in the footnotes to the financial statements.

Requirement b. Explain the deficiencies in Patel's report as drafted.

Identify which of the following are deficiencies in Patel's report as drafted. (Select all that apply.)

1.The audit was made in accordance with auditing standards generally accepted in the United States of America rather than generally accepted accounting

standards.

2.

There is no mention in the report that Bellamy is a private corporation.

3.

The opinion paragraph includes the words "generally accepted auditing standards" rather than the phrase "accounting principles generally accepted in the United States of America."

4.

There is no separate management's responsibility section that states the responsibilities of management.

5.

The word material is excluded from the statement that should be part of the auditor's responsibility (free of material misstatement).

6.

The opinion should be qualified rather than being unmodified.

7.

The opinion paragraph states that accounting principles were consistent with those used in the prior year. The opinion paragraph should make no reference to consistency.

8.

There is no mention in the report that Bellamy Corporation is a defendant in a litigation.

9.

There are comparative statements, but the audit report identifies and deals with only the current year's financial statements. An opinion must also be included for the prior period financial statements.

10.

The opinion paragraph excludes the required phrase, "in all material respects."

11.

The balance sheet is as of a specific date, whereas the income statement and the statement of retained earnings are for a period of time. The introductory paragraph should identify the period of time (usually one year).

12.

Additional paragraph(s) should be included that describe the limitation on the scope related to audit testing for accounts receivable, and the failure to include disclosure of the loss contingency related to pending litigation.

13.

The audit report is neither addressed nor dated and it does not contain a title.

14.

There is no separate auditor's responsibility section that defines reasonable assurance and states the responsibilities of the auditor in conducting an audit in accordance with GAAS.

15.

The basis for opinion paragraph needs to be expanded to state that the auditor is independent and has fulfilled their ethical responsibilities in accordance with relevant ethical requirements. The sentence related to obtaining reasonable assurance should be included in a separate section on the auditor's responsibilities.