The typical auditing textbook includes, as one of its final chapters, a detailed coverage of the audit report, with special emphasis on departures from the unqualified report. Nevertheless, students often have difficulty in adequately distinguishing among several types of audit opinions. The student with no experience in the field remains somewhat confused. Perhaps graphic presentation can provide a helpful supplement for the classroom. Chapter 10 of the book "Auditing Standards & Procedures" is an excellent piece of writing and a much-needed contribution in this context. There can be seven type of audit reports, and modifications in the audit report may result from many situations. Primary among them are, a deficiency in auditing resulting from a restriction in the scope of auditing, a deficiency in accounting in the form of incorrect financial statements, and an uncertainty concerning future developments. The article proposes and discusses a graphical representation of these aspects to gain better understanding of audit reports.

When treasury shares are acquired, the transaction results in the reduction of contributed capital, legal capital remains the same, and the restriction of retained earnings. If legal aspects are to be demphasized, it appears that the "direct adjustment to capital stock" is the best solution. But even though legal requirements are not ranked first in importance, they should not be forgotten. In this case, perhaps the "indirect adjustment to capital stock" is a better alternative. Accounting recognition must also include balance sheet classification as to Stockholders' equity. Differences in state laws would require a different arrangement. However, in both cases total invested capital remains the same. If a temporary restriction of retained earnings is needed, it can be shown in a footnote or as an appropriation of retained earnings. In a state which requires a permanent reduction of retained earnings, the nature of the transaction is a dividend rather than a "retirement." And so it must be recorded as a dividend. The nature of the transaction must be given first priority in recording treasury stock. Then, any legal aspects may also be satisfied in statement presentation.