Adverse Opinion. The board of directors of Cook Indus-tries Inc. engaged Brown & Brown, CPAs, to audit the financial statements for the year ended December 31, 2014. Required: Identify the deficiencies in the following draft of the report. Do not rewrite the report.
Independent Auditor’s Report
To the President of Cook Industries Inc.:
We have audited the accompanying financial statements of Cook Industries Inc. for the year ended December 31, 2014, and the related notes to the financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 from material misstatement.
Auditor’s Responsibility
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion
As discussed in Note G to the financial statements, the Company carries its property and equipment at appraisal values and provides depreciation on the basis of such values. Furthermore, the Company does not provide for income taxes with respect to differences between financial income and taxable Income arising from the use, for income tax purposes, of the installment method of reporting gross profit from certain types of sales.

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cook Industries Inc. as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.