Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 53

Audit Report Deficiencies: Comparative Reporting. An assistant drafted the following auditors' report at the completion of the audit of Cramdon Inc. on March 5, 2015. The partner in charge of the engagement has decided the opinion on the 2014 financial statements should be modified only with reference to the change in the method of computing the cost of inventory. In 2013, Cramdon used the next-in, first-out (NIFO) method, which is not permissible under GAAP, but in 2014 changed to FIFO and restated the 2013 financial statements. (The auditors' report on the 2013 financial statements expressed an adverse opinion.) The 2013 auditors' report (prepared by the same firm) was dated March 5, 2014.

Required:
Identify the deficiencies and errors in the draft report and write an explanation of the reasons they are errors and deficiencies. Do not rewrite the report.