First Paragraph Allen's Disclaimer of Opinion Draft To: The Board of Directors We audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Second Paragraph Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with auditing 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 financial statements that are free from material misstatement, whether due to fraud or error. Third Paragraph Auditor's Responsibility Our responsibility is to express an opinion on management's assertions based on conducting the audit in accordance with auditing standards generally accepted in the United States of America. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Fourth Paragraph Basis for Disclaimer of Opinion We were not engaged as auditors of ABC Company until after December 31, 20X1, and, therefore, did not observe the counting of physical inventories at the beginning or end of the year. Also, we were not able to confirm receivables. We were able to satisfy ourselves by other auditing procedures concerning the inventory and receivables held at December 31, 20X1, which is stated in the balance sheet at $XXX and $XXX, respectively. As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect to recorded or unrecorded inventories and accounts receivable and the elements making up the statements of income, changes in stockholders' equity, and cash flows. Fifth and Final Paragraph Disclaimer of Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we express a qualified opinion on these financial statements. Scroll down to complete all parts of this task. Allen, a staff member, has drafted a disclaimer for ABC Company, a nonissuer, that Barnes, a partner, is evaluating. For each of the comments below, indicate whether Allen's draft is correct, Barnes's comment is correct, or neither Allen's draft nor Barnes's comment is correct. A choice may be used once, more than once, or not at all. Barne's comment Answer First Paragraph man 1. The report should state that the financial statements were reviewed, not audited. Second Paragraph (Management's Responsibility for the Financial Statements) 2. "Management is responsible" should be replaced with "The auditor is responsible 3. "Auditing principles should be replaced with "accounting principles." Third Paragraph (Auditor's Responsibility) 4. "Management's assertions" should be replaced with "management's representations." 5. "To obtain sufficient appropriate audit evidence" should be replaced with "to gain confidence sufficient." Fourth Paragraph (Basis for Disclaimer of Opinion) 6. "We were able to satisfy" should be changed to "We were unable to satisfy." 7. The paragraph should not include the dollar amounts related to the inventories and receivables. Fifth Paragraph (Disclaimer of Opinion) 8. The word "qualified" should be changed to "adverse." ! Select an option below O Allen's draft is correct. O Barnes's comment is correct. . O Neither Allen's draft nor Barnes's comment is correct. . RESET CANCEL ACCEPT