The financial statements for the Old Salt Shipbuilding Company, prepared for the year ended June 30, 19X9, contain the following note:

It is the Company's consistent accounting practice to recognize profit and loss from shipyard operations on the completed contract basis, except that estimated losses on uncompleted contracts are provided for when ascertainable. A substantial loss was incurred on completion during the current year of a contract for the construction of two patrol escort vessels for the United States Navy. Shipyard costs and expenses for the previous year included a provision for such loss in the net amount of \($350,000\) (representing the \($630,000\) loss estimated at that time, less \($280,000\) of federal income taxes expected to be recovered under carryback provisions of the Internal Revenue Code), and the remainder of the loss is included in the operating results for the current year. The financial statements for the previous year have been restated for purposes of comparability to include \($630,000\) in shipyard costs and expenses and to show \($280,000\) as an estimated tax refund. 

The loss on this contract may be reduced by indeterminable amounts which may be collected as a result of claims which have not been negotiated with the Navy. 

Prepare the auditor's report to accompany the statements, assuming that the auditor has complied with generally accepted auditing standards and has no questions on any matters except those covered in the note.