Continued... Auditing - Test 1 - Problem 4-Fall 2020 Name Curt's Retail Store, a nonpublic company, hires Smythe & Co., CPAs to audit its financial statements. Howard Smythe, the audit partner, drafted the following report. Independent Auditor's Report To the Management of Curt's Retail Store: We have examined the accompanying financial statements of Curt's Retail Store, which comprise the balance sheets as of December 31, 20X8 and 20X7, and the related consolidated statements of income, retained earnings, and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial 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 financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or illegal acts. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Curt's Retail Store, as of December 31, 20X8 and 20X7, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Smyth & Co, CPAS Phoenix, Arizona February 12, 20X9 Respond to the accuracy of the following comments made by a reviewer of the report. If the comment is correct, explain. Is comment correct? Comment: a. The report should not be addressed to management b. The report should indicate that we have audited, rather than examined, the financial statements (first paragraph after introduction) The report should state that the auditors' responsibility is to express reasonable assurance, not an opinion (first paragraph under "Auditor's Responsibility'). d. The report should not indicate anything concerning management's responsibility for internal control. e. The audit is designed to assess risks of material misstatements due to errors or fraud; the term illegal acts is incorrect