The Commission on Auditor’s Responsibilities recommended the following form of audit report:

Report of Independent Auditors Financial Statements The accompanying consolidated balance sheet of XYZ Company as of December 31, 19X6, and the related statements of consolidated income, retained earnings, and changes in consolidated financial position for the year then ended, including the notes, are the representations of XYZ Company’s management, as explained in the report by management.
In our opinion, those financial statements in all material respects present the financial position of XYZ Company at December 31, 19X6, and the results of its operations and changes in its financial position for the year then ended in conformity with generally accepted accounting principles appropriate in the circumstances.
We audited the financial statements and the accounting records supporting them in accordance with generally accepted auditing standards. Our audit included a study and evaluation of the company’s accounting system and the related controls, tests of details of selected balances and transactions, and an analytical review of the information presented in the statements. We believe our auditing procedures were adequate in the circumstances to support our opinion.
Other Financial Information We reviewed the information appearing in the annual report [or other document] in addition to the financial statements, and found nothing inconsistent in such other information with the statements or the knowledge obtained in the course of our audits. [Any other information reviewed, such as replacement cost data, would be identified.]
We reviewed the interim information released during the year. Our reviews were conducted each quarter [or times as explained] and consisted primarily of making appropriate inquiries to obtain knowledge of the internal account¬ ing control system, the process followed in preparing such information and of financial and operating developments during the periods, and determining that the information appeared reasonable in the light of the knowledge we obtained from our inquiries during the current year, from any procedures completed to the interim date in connection with our audit for such year.

and from our audits for preceding years. Any adjustments or additional disclosures we recommended have been reflected in the information.
Internal Accounting Controls Based on our study and evaluation of the accounting system and related controls, we concur with the description of the system and controls in the report by management [or, Based on our study and evaluation of the accounting system and controls over it, we believe the system and controls have the following uncorrected material weaknesses not described in the report by management . . .] [or other disagreements with the description of the system and controls in the report by management] [or a description of uncorrected material weaknesses found if there is no report by management], Nevertheless, in the performance of most control procedures, errors can result from personal factors, and also, control procedures can be circumvented by collusion or overridden. Projection of any evaluation of inter¬ nal accounting control to future periods is subject to the risk that changes in conditions may cause procedures to become inadequate and the degree of compliance with them to deteriorate.
Other Matters We reviewed the company’s policy statement on employee conduct, de¬ scribed in the report by management, and reviewed and tested the related controls and internal audit procedures. While no controls or procedures can prevent or detect all individual misconduct, we believe the controls and internal audit procedures have been appropriately designed and applied during the year.
We met with the audit committee [or the board of directors] of XYZ Company as often as we thought necessary to inform it of the scope of our audit and to discuss any significant accounting or auditing problems encountered and any other services provided to the company [or indication of failure to meet or insufficient meetings or failure to discuss pertinent problems].

Required:

a. Discuss the substantive differences between the present audit report and the preceding one.

b. Identify the representations made in the form of report recommended by the Commission on Auditors’ Responsibilities that are (1) implied and (2) not implied in the present audit report.

c. State the advantages and disadvantages of the form of report recommended by the Commission on Auditors’ Responsibilities.

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Test Check & Co. Certified Public Accountants