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Wallace & Wallace, CPAs, audited the financial statements ofWest Co., a nonpublic entity, for the year ended September 30,20X1, and expressed an unqualified opinion. For the year endedSeptember 30, 20X2, West issued comparative financial statements.Wallace & Wallace reviewed West's 20X2 financial statements andGordon, an assistant on the engagement, drafted the accountant'sreview report below. Martin, the engagement supervisor, decided notto reissue the prior year's auditor's report, but instructed Gordonto include a separate paragraph in the current year's review reportdescribing the responsibility assumed for the prior year's auditedfinancial statements.

Martin reviewed Gordon's draft and indicated in Martin's ReviewNotes that there were many deficiencies in Gordon's draft.Accountant's Review Report

We have reviewed the accompanying balance sheet of West Companyas of September 30, 20X2, and the related statements of income andcash flows for the year then ended.

A review includes primarily applying analytical procedures tomanagement's financial data and making inquiries of companymanagement. A review also includes assessing the accountingprinciples used and significant estimates made by management, aswell as, evaluating the overall financial statement presentation.Management is responsible for the preparation and fair presentationof the financial statements in accordance with accountingprinciples generally accepted in the United States of America. Ourresponsibility is to conduct the review in accordance withstandards issued by the American Institute of Certified PublicAccountants. Those standards require us to perform procedures toobtain limited assurance that there are no material modificationsthat should be made to the financial statements. We believe thatthe results of our procedures provide a reasonable basis for ourreport. Based on our review, we are not aware of any materialmodifications that should be made to the accompanying financialstatements. Accordingly, the accompanying financial statements havebeen prepared assuming that the company will continue as a goingconcern. Furthermore, we have no responsibility to update thisreport for events and circumstances occurring after the date ofthis report. The financial statements for the year ended September30, 20X1, were audited by us and we expressed an unqualifiedopinion on them in our report dated November 7, 20X1, but we havenot performed any auditing procedures since that date. In ouropinion, the financial statements referred to above are presentedfairly, in all material respects, for the year then ended inconformity with generally accepted accounting principles.

Wallace & Wallace, CPAs November 6, 20X2 For each reportdeficiency noted by Martin, select whether (1) Martin is correct;(2) Gordon is correct; or (3) both are incorrect.

1. There should be a reference to the prior year's auditedfinancial statements in the first (introductory) paragraph.

2. All of the current year's basic financial statements are notproperly identified in the first (introductory) paragraph.

3. The standards referred to in the third (accountant'sresponsibilities) paragraph should not be standards issued by theAmerican Institute of Certified Public Accountants, but should beStandards for the Compilation and Review of FinancialStatements.

4. The title of the report should be Independent Review Report.The statement in the third paragraph that the accountant isrequired to perform procedures to obtain limited assurance thatthere are no material modifications that should be made to thefinancial statements should be in the introductory paragraphfollowing the description of a review.

5. There should be a statement in the second (management'sresponsibilities) paragraph that describes management'sresponsibilities relative to internal control.

6. There should be a comparison of the scope of a review to anaudit in the introductory paragraph.

7. There should be no reference to assessing the accountingprinciples used; significant estimates made by management; andevaluating the overall financial statement presentationin theintroductory paragraph.

8. There should be a reference to "conformity with generallyaccepted accounting principles" in the fourth paragraph.

9. There should be a reference to consistency in the fourthparagraph.

10. There should be a restriction on the distribution of theaccountant's review report in the fourth paragraph.

11. The reference to "going concern" in the fourth paragraphshould be in the first paragraph.

12. The accountant's lack of responsibility to update the reportin the fourth paragraph should be in the first paragraph.

13. There should be no mention of the type of opinion expressedon the prior year's audited financial statements in the fifth(separate) paragraph.

14. All of the prior year's basic financial statements are notproperly identified in the fifth (separate) paragraph.

15. The reference in the fifth (separate) paragraph to the fairpresentation of the prior year's audited financial statements inaccordance with generally accepted accounting principles should beomitted.

16. The report should be dual dated to indicate the date of theprior year's auditor's report.