231. Simulation Casa Royale, Inc., a nonpublic company, retained Ying and Company CPA to perform an audit of the fi nancial statements for the current year. Howard Smythe, the partner in charge of the audit, drafted the following unmodifi ed report:

To the Management of Casa Royale, Inc.: We have examined the accompanying consolidated balance sheet of Casa Royale, Inc., and its subsidiaries, as of December 31, 20X1, and the related consolidated statements of income, retained earnings, and cash fl ows for the years then ended. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated fi nancial 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 consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or illegal acts. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated fi nancial 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 entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of signifi cant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is adequate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated fi nancial statements referred to above present fairly, in all material respects, the fi nancial position of Casa Royale, Inc., and its subsidiaries as of December 31, 20X1, and the results of their operations and their cash fl ows for the years then ended in accordance with auditing standards generally accepted in the United States of America. Howard Smythe , Partner Phoenix, Arizona February 12, 20X2 Reviewers Comments Comment Is Correct (yes or no) a. The report should not be addressed to management. b. The report should indicate that we have audited, rather than examined, the fi nancial statements (fi rst paragraph after introduction). c. The report should not indicate anything concerning managements responsibility for internal control. d. The report should state that the auditors responsibility is to express reasonable assurance, not an opinion (fi rst paragraph under auditors responsibility). e. The audit is designed to assess risks of material misstatements due to errors or fraud; the term illegal acts is incorrect (second paragraph under auditors responsibility). f. The report should not refer to the auditors evaluating the appropriateness of accounting policies, since those are the responsibility of management. g. The evidence should be suffi cient and appropriate rather than adequate (third paragraph under auditors responsibility).

Reviewers Comments Comment Is Correct (yes or no) h. The opinion should not include in all material respects since the auditors are providing an opinion on the accuracy of the fi nancial statements (opinion paragraph). i. The opinion should be on accounting principles generally accepted in the United States of America, not on auditing standards (opinion paragraph). j. The signature on the report should be that of the CPA fi rm, not that of the partner.