The following auditors report was drafted by a staff accountant of Nathan and Mat- thew, CPAs, at the completion of the audit of the comparative financial statements

of Monterey Partnership for the years ended December 31, 2015 and 2014. Mon- terey is a privately held company that prepares its financial statements on the income

tax basis of accounting. The report was submitted to the engagement partner, who

reviewed matters thoroughly and properly concluded that an unmodified opinion

should be expressed. The draft of the report prepared by an inexperienced staff audi- tor is as follows:

Auditors Report

We have audited the accompanying financial statements of Monterey Partnership,

which comprise the statements of assets, liabilities, and capitalincome tax basis as

of December 31, 2015, and the related statements of revenue and expensesincome

tax basis and of changes in partners capital accountsincome tax basis for the year

then ended, and the related notes to the financial statements.

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Auditors Responsibility

We conducted our audit in accordance with standards established by the AICPA.

Those standards require that we plan and perform the audit to obtain reasonable assur- ance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the

amounts and disclosures in the financial statements. The procedures selected depend

on the auditors judgment, including the assessment of the risks of material mis- statement of the financial statements, whether due to fraud or error. An audit also

includes evaluating the appropriateness of accounting policies used as well as evalu- ating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate

to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all

material respects, the assets, liabilities, and capital of Monterey Partnership as of

December 31, 2015, and its revenue and expenses and changes in partners capital

accounts for the year then ended in conformity with generally accepted accounting

principles applied on a consistent basis.

Basis of Accounting

We draw attention to Note 2 of the financial statements, which describes the basis

of accounting. The financial statements are prepared on the basis of accounting the

Partnership uses for income tax purposes. Accordingly, these financial statements

are not designed for those who do not have access to the Partnerships tax returns.

Our opinion is not modified with respect to this matter.

Nathan and Matthew, CPAs

April 3, 2016

Required:

Identify the errors and omissions in the auditors report as drafted by the staff audi- tor. Group the errors and omissions by paragraph, where applicable. Do not redraft

the report.