Russ Major, CPA, drafted the following report on October

25, 20XX at the completion of the engagement to compile the financial statements of Ajax Company for the year ended September

30, 20XX. Ajax is a nonpublic entity in which Major's child

has a material direct financial interest. Ajax decided to omit substantially

all of the disclosures required by GAAP because the

financial statements will be only for management's use. The statement

of cash flows was also omitted because management does not

believe it to be a useful financial statement.

Identify the deficiencies contained in Major's report on the

compiled financial statements. Group the deficiencies by paragraph

when applicable. Do not redraft the report.

To the Board of Directors of Ajax Company:

I have compiled the accompanying financial statements of Ajax Company

as of September 30, 20XX, and for the year then ended. I planned

and performed the compilation to obtain limited assurance about

whether the financial statements are free of material misstatements.

A compilation is limited to presenting information in the form of

financial statements. It is substantially less in scope than an audit in

accordance with generally accepted auditing standards, the objective

of which is the expression of an opinion regarding the financial

statements taken as a whole. I have not audited the accompanying

financial statements and, accordingly, do not express any opinion on

them.

Management has elected to omit substantially all of the disclosures

required by generally accepted accounting principles. If the omitted

disclosures were included in the financial statements, they might influence

the user's conclusions about the Company's financial position,

results of operations, and changes in financial position.

I am not independent with respect to Ajax Company. This lack of

independence is due to my child's ownership of a material direct

financial interest in Ajax Company.

This report is intended solely for the information and use of the Board

of Directors and management of Ajax Company and should not be

used for any other purpose.