At the completion of the fieldwork on September 14, 2022, Arnold, a staff accountant of Pell \& Pell, CPAs, drafted an auditor's report. The draft report (shown below) was for the audit of the consolidated financial statements of Bond Co., a nonpublic company, for the year ended July 31, 2022. The report was submitted to the engagement partner who completed reviewing the audit working papers and reach a conclusion about the audit on September 29. When Arnold drafted the report, he considered the following: - Bond's consolidated financial statements for the year ended July 31, 2022 are to be presented for comparative purposes. Pell \& Pell previously audited these statements and appropriately rendered an unmodified report. - Bond has suffered recurring losses from operations and has adequately disclosed these losses and management's plans concerning the losses in a note to the consolidated financial statements. Although Bond has prepared the financial statements assuming it will continue as a going concern. Pell \& Pell has substantial doubt about Bond's ability to continue as a going concern. - Smith, CPA, audited the financial statements of BC Services, Inc, a consolidated subsidiary of Bond, for the year ended July 31, 2022. The subsidiary's financial statements reflected total assets and revenues of 15% and 18% , respectively, of the consolidated totals. Smith expressed an unqualified opinion andifurnished Pell \& Pell with a copy of the auditor's report. Smith also granted permission to present the report together with the principal auditor's report. Pell \& Pell decided to make reference to Smith's work. - Bond did not write-down the impairment of several assets included on the balance sheet as fixed assets. Although the amounts were immaterial, Arnold believed that management's failure to adjust the accounts created a significant. disagreement with the auditing firm that warranted an explanatory paragraph in the auditor's report. REQUIRED: Identify the deficiencies in the auditor's report (below) as drafted by Amold, the staff accountant at Pell \& Pell. Independent Auditor's Report Report on the Audit of the Financial Statements Qualified Opinion We have audited the consolidated balance sheets of Bond Company and subsidiaries as of July 31, 2022 and 2021 , and the related statements of income, cash flows, and retained earnings, and the related notes to the financial statements. In our opinion, based on our audits and the report of Smith, CPA, the consolidated financial statements present fairly, except for the matter of recurring losses discussed below, the financial position of Bond Co. as of July 31, 2022 and 2021, and the results of its operations for the years then ended. We did not audit the financial statements of BC Services, Inc., a wholly owned subsidiary. Those statements were audited by Smith, CPA, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for BC Services. Inc., is .
At the completion of the fieldwork on September 14- 2022- Arnold- a st.docx
1. At the completion of the fieldwork on September 14, 2022, Arnold, a staff accountant of Pell &
Pell, CPAs, drafted an auditor's report. The draft report (shown below) was for the audit of the
consolidated financial statements of Bond Co., a nonpublic company, for the year ended July 31,
2022. The report was submitted to the engagement partner who completed reviewing the audit
working papers and reach a conclusion about the audit on September 29. When Arnold drafted
the report, he considered the following: - Bond's consolidated financial statements for the year
ended July 31, 2022 are to be presented for comparative purposes. Pell & Pell previously
audited these statements and appropriately rendered an unmodified report. - Bond has suffered
recurring losses from operations and has adequately disclosed these losses and management's
plans concerning the losses in a note to the consolidated financial statements. Although Bond has
prepared the financial statements assuming it will continue as a going concern. Pell & Pell has
substantial doubt about Bond's ability to continue as a going concern. - Smith, CPA, audited the
financial statements of BC Services, Inc, a consolidated subsidiary of Bond, for the year ended
July 31, 2022. The subsidiary's financial statements reflected total assets and revenues of 15%
and 18% , respectively, of the consolidated totals. Smith expressed an unqualified opinion
andifurnished Pell & Pell with a copy of the auditor's report. Smith also granted permission to
present the report together with the principal auditor's report. Pell & Pell decided to make
reference to Smith's work. - Bond did not write-down the impairment of several assets included
on the balance sheet as fixed assets. Although the amounts were immaterial, Arnold believed that
management's failure to adjust the accounts created a significant. disagreement with the auditing
firm that warranted an explanatory paragraph in the auditor's report. REQUIRED: Identify the
deficiencies in the auditor's report (below) as drafted by Amold, the staff accountant at Pell &
Pell. Independent Auditor's Report Report on the Audit of the Financial Statements Qualified
Opinion We have audited the consolidated balance sheets of Bond Company and subsidiaries as
of July 31, 2022 and 2021 , and the related statements of income, cash flows, and retained
earnings, and the related notes to the financial statements. In our opinion, based on our audits
and the report of Smith, CPA, the consolidated financial statements present fairly, except for the
matter of recurring losses discussed below, the financial position of Bond Co. as of July 31, 2022
and 2021, and the results of its operations for the years then ended. We did not audit the financial
statements of BC Services, Inc., a wholly owned subsidiary. Those statements were audited by
Smith, CPA, whose report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for BC Services. Inc., is based solely on the report of Smith, CPA. The
accompanying consolidated financial statements have been prepared with the disclosure in Note
13 that the company has suffered recurring losses from operations. Management's plans in regard
to those matters are also discussed in Note 13. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. During the course of the
audit, significant disagreements were noted between our auditors and the management of Bond
Company. As a result, despite an appropriate level of professional skepticism, a high level of
inherent risks exists. Basis for Qualifed Opinion We conducted our audit in accordance with
generally accepted auditing standards, Our responsiblities under those standards are further
described in the Auditor's Responsibilities for the Audit of the Financial Statements section of
our report. We are reauired to be independent of Bond Company and to meet our other ethical
responsibilities, in accordance with the relevant. ethical requirements relating to our audit. We
believe that the audit evidence we have obtained is apgropriate for the basis for We conducted
our audit in accordance with generally accepted auditing standards. Our responsibilities under
those standar are further described in the Auditor's Responsibilities for the Audit of the Financial
2. Statements section of our report. We are required to be independent of Bond Company and to
meet our other ethical responsibilities, in accordance with the relevant ethical requirements
relating to our audit. We believe that the audit evidence we have obtained is appropriate for the
basis fo our audit opinion. Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of the financial statements in accordance with
accounting principles generally accepted in the United States of America, and for the
implementation and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from misstatement. In preparing the financial
statements, management is required to evaluate whether Bond Company's has the ability to
remain in business for one year following the issuance of the financial statements. Auditor's
Responsibilities for the Audit of the Financial Statements Our objectives are to obtain assurance
about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor's report that includes our opinion. We attain a high
level. of assurance but is not absolute assurance and therefore is not a guarantee that an audit
conducted in accordance with GAAS will always detect a material misstatement when it exists.
The risk of not detecting a Material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion. Misstatements are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users. Material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion. Misstatements are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users. In performing an audit in accordance with GAAS, we: - Maintain professional
skepticism throughout the audit. - Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, and design and perform audit procedures
responsive to those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts in the financial statements. - Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are appropriate in the circumstances. - Evaluate
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management. We are required to communicate with those charged with
governance Migarding, including significant audit findings. September 14,2022 Pell & Pell,
CPAs