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Patel, CPA, has completed the audit of the financial statements of Bellamy Corporation as of and for the year ended December 31, 2016. Patel also

Patel, CPA, has completed the audit of the financial statements of Bellamy Corporation as of and for the year ended December 31, 2016. Patel also audited and reported on the Bellamy financial statements for the prior year. Patel drafted the following report for 2016.

We have audited the balance sheet and statements of income and retained earnings of Bellamy Corporation as of December 31, 2016. We conducted our audit in accordance with generally accepted accounting standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial position of Bellamy Corporation as of December 31, 2016, and the results of its operations for the year then ended in conformity with generally accepted auditing standards, applied on a basis consistent with those of the preceding year.

Bellamy is a private corporation and is presenting comparative financial statements.

-During 2016, Bellamy acquired Stockard Inc. and the effects of that transaction are reflected in the current year financial statements. Information about this transaction is disclosed in footnote 12.

-Patel was unable to perform normal accounts receivable confirmation procedures for accounts that are material, but not pervasive, to the financial statements. Unfortunately, Patel was not able to perform alternative procedures to support the existence of the receivables.

-Bellamy Corporation is the defendant in litigation where there is a reasonable possibility that Bellamy may be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. Because management does not want to provide any information that the plaintiff might use against Bellamy, the case is not discussed in the financial statements.

-Bellamy issued debentures on January 31, 2015, 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, 2020. Bellamy has disclosed this in the footnotes to the financial statements.

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.* *Based on AICPA question paper, American Institute of Certified Public Accountants.

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