On September 23, 2018, Betsy Ross drafted the following report on Continental Corporation's financial statements.

To Whom It May Concern:

We have audited the accompanying financial statements of Continental Corporation, which comprise the balance sheet as of July 31, 2018, and the related statements of income and changes in shareholders' equity for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management 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.

Auditor's Responsibility

In accordance with instructions by Continental's management, we have conducted a complete audit. 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.

Opinion

In our opinion, with the explanation given below and with the exception of some minor errors we consider immaterial, the financial statements referred to above present the financial position of Continental Corporation as of July 31, 2018, and the results of its operations and its cash flows for the year then ended in accordance with pronouncements of the Financial Accounting Standards Board.

Emphasis of Matter

In many respects, this was an unusual year for Continental Corporation. The weakening of the economy in the early part of the year and the strike of plant employees in the summer led to a decline in sales and net income. After making several tests of the sales records, nothing came to our attention that would Indicate sales have not been properly recorded.

Required:

List and explain the deficiencies and omissions in the report prepared by Ross on Continental Company's financial statements?