The following auditor's report was drafted by a staff accountant of Jones & Jones, CPAs, at the
Question:
The following auditor's report was drafted by a staff accountant of Jones \& Jones, CPAs, at the completion of the audit engagement on the financial statements of Adams Mining, Inc., for the year ended December 31, 19X7. It was submitted to the engagement partner who reviewed the audit report and the working papers thoroughly and properly concluded that an unqualified opinion should be issued.
The financial statements for the year ended December 31, 19X6 are to be presented for comparative purposes. Jones \& Jones previously audited these statements and expressed an unqualified opinion.
On January 31, 19X8, Adams acquired a new subsidiary, Harris Coal, Inc. Disclosure of this subsequent event was properly made in Note \(\mathrm{T}\) to the consolidated financial statements.
To the Management of Adams Mining, Inc.:
We have audited the consolidated balance sheets of Adams Mining, Inc. and subsidiaries as of December 31, 19X7 and 19X6, and the related consolidated statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position as of December \(31,19 \times 7\), and the related consolidated statements of income and retained earnings for the year then ended, in accordance with generally accepted accounting principles.
Required:
Identify the deficiencies contained in the auditor's report as drafted by the staff accountant. Do not redraft the report.
Step by Step Answer:
Auditing An Assertions Approach
ISBN: 9780471134213
7th Edition
Authors: G. William Glezen, Donald H. Taylor