Question

18-28 The following auditor’s report was drafted bya staff accountant of Nathan and Matthew, CPAs, at the completionof the audit of the comparative inan- cial statements of MontereyPartnership for the years ended December 31, 2013 and 2012.Monterey is a privately held company that prepares its inan- cialstatements on the income tax basis of accounting. The report wassub- mitted to the engagement partner, who reviewed mattersthoroughly and properly concluded that an unmodiied opinion shouldbe expressed. The draft of the report prepared by a staff accountis as follows:
Auditor’s Report
We have audited the accompanying inancial statements of MontereyPartnership, which comprise the statements of assets, liabilities,and capital–income tax basis as of December 31, 2013, and therelated statements of revenue and expenses–income tax basis and ofchanges in partners’ capital accounts–income tax basis for the yearthen ended, and the related notes to the inancial statements.
Auditor’s Responsibility
We conducted our audit in accordance with standards established bythe AICPA. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the inancialstatements are free from material misstatement.
An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the inancial statements. Theprocedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the inancialstatements, whether due to fraud or error. An audit also includesevaluating the appropriateness of accounting policies used as wellas evaluating the overall presentation of the inancialstatements.
We believe that the audit evidence we have obtained is suficientand appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the inancial statements referred to above presentfairly, in all material respects, the assets, liabilities, andcapital of Monterey Partnership as of December 31, 2013, and itsrevenue and expenses and changes in part- ners’ capital accountsfor the year then ended in conformity with generally acceptedaccounting principles applied on a consistent basis.
Basis of Accounting
We draw attention to Note 2 of the inancial statements, whichdescribes the basis of accounting. The inancial statements areprepared on the basis

of accounting the Partnership uses for income tax purposes.Accordingly, these inancial statements are not designed for thosewho do not have access to the Partnership’s tax returns. Ouropinion is not modiied with respect to this matter.
Nathan and Matthew, CPAs April 3, 2014
Required:
Identify the errors and omissions in the auditor’s report asdrafted by the staff accountant. Group the errors and omissions byparagraph, where applicable. Do not redraft the report.