QUESTION 34

1. Wallace & Wallace, CPAs, audited the financial statements of West Co., a nonpublic entity, for the year ended September 30, 20X1, and expressed an unqualified opinion. For the year ended September 30, 20X2, West issued comparative financial statements. Wallace & Wallace reviewed West's 20X2 financial statements and Gordon, an assistant on the engagement, drafted the accountant's review report below. Martin, the engagement supervisor, decided not to reissue the prior year's auditor's report, but instructed Gordon to include a separate paragraph in the current year's review report describing the responsibility assumed for the prior year's audited financial statements. Martin reviewed Gordon's draft and indicated in Martin's Review Notes that there were many deficiencies in Gordon's draft. Accountant's Review Report We have reviewed the accompanying balance sheet of West Company as of September 30, 20X2, and the related statements of income and cash flows for the year then ended. A review includes primarily applying analytical procedures to management's financial data and making inquiries of company management. A review also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America. Our responsibility is to conduct the review in accordance with standards issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements. Accordingly, the accompanying financial statements have been prepared to assume that the company will continue as a going concern. Furthermore, we have no responsibility to update this report for events and circumstances occurring after the date of this report. The financial statements for the year ended September 30, 20X1, were audited by us and we expressed an unqualified opinion on them in our report dated November 7, 20X1, but we have not performed any auditing procedures since that date. In our opinion, the financial statements referred to above are presented fairly, in all material respects, for the year then ended in conformity with generally accepted accounting principles.

Wallace & Wallace, CPAs November 6, 20X2 For each report deficiency noted by Martin, select whether (1) Martin is correct; (2) Gordon is correct, or (3) both are incorrect.

	There should be a reference to "conformity with generally accepted accounting principles" in the fourth paragraph.
	There should be a reference to consistency in the fourth paragraph.
	There should be a restriction on the distribution of the accountant's review report in the fourth paragraph.
	The reference to "going concerned" in the fourth paragraph should be in the first paragraph.
	The accountant's lack of responsibility to update the report in the fourth paragraph should be in the first paragraph.
	There should be no mention of the type of opinion expressed on the prior year's audited financial statements in the fifth (separate) paragraph.
	All of the prior year's basic financial statements are not properly identified in the fifth (separate) paragraph.
	The reference in the fifth (separate) paragraph to the fair presentation of the prior year's audited financial statements in accordance with generally accepted accounting principles should be omitted.
	The report should be dual dated to indicate the date of the prior year's auditor's report.