Roscoe, public accountant, has completed the exami¬ nation of the financial statements of Excelsior Corporation as of and for the year ended December 31, 2001. Roscoe also examined and reported on the Excelsior financial statements for the prior year. Roscoe drafted the following report for 2001:

We have audited the balance sheet and statements of income and retained earnings of Excelsior Corporation as of Decem¬ ber 31, 2001 We conducted our audit in accordance with Canadian generally accepted accounting standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of misstatement.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly the financial position of Excelsior Corporation as of December 31, 2001, and the results of its operations for the year then ended in conformity with Canadian generally accepted auditing standards, applied on a basis consistent with those of the preceding year.

Other Information:
• Excelsior is presenting comparative financial statements.
• Excelsior does not wish to present a cash flow statement for either year.
• During 2001, Excelsior changed its method of accounting for long-term construction contracts, properly reflected the effect of the change in the current year's financial statements, and restated the prior year's statements Roscoe is satisfied with Excelsior's justification for making the change. The change is discussed in footnote 12.

Roscoe was unable to perform normal accounts receivable confirmation procedures, but alternate procedures were used to satisfy Roscoe as to the existence of the receivables.
• Excelsior Corporation is the defendant in a lawsuit, the outcome of which is highly uncertain. If the case is settled in favour of the plaintiff, Excelsior will be required to pay a substantial amount of cash which might require the sale of certain capital assets. The litigation and the possible effects have been properly disclosed in footnote 11.
• Excelsior issued debentures on January 31, 1999, in the amount of $10,000,000. 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, 2000. Excelsior declined to disclose this essential data in the footnotes to the financial statements.
Required

a. Identify and explain any items included in "Other Infor¬ mation" that need not be part of the auditor's report.

b. Explain the deficiencies in Roscoe's auditor's report as drafted.
(AICPA adapted)