Part V. Audit Report Deficiencies 12 points (3 points for each deficiency) The following auditor's report was drafted by Maddux, Glavine, & Smoltz, CPAs, following the completion of the audit of the financial statements of NORTEL NETWORKS CORP (publicly listed), for the year ended December 31, 2017. The report was submitted to the engagement partner, who reviewed the audit workpapers and properly concluded that an unqualified opinion should be issued. In drafting the report, the following items were considered. 1. The 2017 financial statements are affected by an uncertainty surrounding a lawsuit, the outcome of which cannot presently be estimated. The lawsuit is adequately disclosed in the notes of the financial statements. 2. The financial statements for the year ended December 31, 2016 are to be presented for comparative purposes. Maddux, Glavine, & Smoltz previously audited these statements and issued an unqualified opinion. 3. Audit report on internal control over financial reporting will be issued separately from audit report on financial statements. Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of NORTEL NETWORKS CORP We have audited the accompanying balance sheets of NORTEL NETWORKS CORP as of December 31, 2017 and 2016, and the related statements of income and cash flows for the years then ended. These financial statements are the responsibility of the Company's management We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain assurance about whether the financial statements are fairly presented. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for determining whether any material modification should be made to the accompanying financial statements. In our opinion, except for the accounting change, with which we concur, the financial statements referred to above present fairly the financial position of NORTEL NETWORKS CORP as of December 31, 2017, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Note Y to the financial statements, the company is a defendant in a lawsuit alleging patent infringement. The company has filed a counteraction, and preliminary hearings on both actions are in progress. Accordingly, any provision for liability is subject to adjudication of this matter. Maddux, Glavine, & Smoltz December 31, 2017 Identify at least four deficiencies in the draft of the audit report and state how each deficiency should be corrected. I will only read the first four if you list more. 1. 2. 3. 4