material missile 3-27 (Objectives 3-1, 3-2, 3-4, 3-6, 3-7) Patel, CPA, has completed the an financial statements of Bellamy Corporation as of and for the year ended Decem 2013. Patel also audited and reported on the Bellamy financial statements for year. Patel drafted the following report for 2013. the audit of the December 31, its for the prior retained earn- ed our audit in andards require about whether the We have audited the balance sheet and statements of income and retained ings of Bellamy Corporation as of December 31, 2013. We conducted our a accordance with generally accepted accounting standards. Those standards that we plan and perform the audit to obtain reasonable assurance about wheth financial statements are free of misstatement. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly the fina cial position of Bellamy Corporation as of December 31, 2013, and the results of : operations for the year then ended in conformity with generally accepted auditi standards, applied on a basis consistent with those of the preceding year. LED Patel, CPA Other Information (Signed) Bellamy is a private corporation and is presenting comparative financial statements. Bellamy does not wish to present a statement of cash flows for either year. . During 2013, Bellamy changed its method of accounting for long-term construc- tion contracts and properly reflected the effect of the change in the current year's financial statements and restated the prior year's statements. Patel is satisfied with Bellamy's justification for making the change. The change is discussed in footnote 12. Patel was unable to perform normal accounts receivable confirmation procedures, but alternative procedures were used to satisfy Patel as to the existence of the receivables. Bellamy Corporation is the defendant in a litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, Bellamy will be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. The litigation and the possible effects have been properly disclosed in footnote 11. - Bellamy issued debentures on January 31, 2012, in the amount of $10 million. The funds obtained from the issuance were used to finance the expansion of plant facilities. The debenture agreement restricts the payment of future cash dividends to earnings after December 31, 2017. Bellamy declined to disclose this essential data in ne footnotes to the financial statements. FESSION Red a. Identify and explain any items included in "Other Information that need not be part of the auditor's report. b. Explain the deficiencies in Patel's report as drafted.*