Blyth

CASE #1 Blyth, Inc.

1. The auditor's report for the fiscal 2003 (i.e., year ended January 31, 2004) financial statements of Blyth, Inc. is on page 2 of the case. Items from the fiscal 2003 10-K filing that are related to the auditor's report follow on pages 3 and 4.

a. What standard information relevant to users of Blyth's financial statements is contained in the 2003 auditor's report?

PwC audited the consolidated balance sheets and the related consolidated statements of earnings, stockholders, equity and cash of Blyth, Inc. and its Subsidiaries for fiscal year 2003 as well as the results of Blyth’s operations and its cash flows for the same fiscal year.

These financial statements are the responsibility of the Blyth’s management; PwC responsibility is to express an opinion on these financial statements based on its audits.

The audits of these statements were conducted in accordance with auditing standards generally accepted in the USA, meaning that the auditor planned and performed the audit so that it obtained a reasonable assurance about whether the financial statements are free of material misstatement. The auditor examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements assessed the accounting principles used and significant estimates made by management, and evaluated the overall financial statement presentation.

The auditor’s opinion regarding the financial statements is qualified regarding the financial statements with notes about changes in accounting principles.

The Auditor’s opinion of both management’s assessment of internal control and of the effectiveness of itself are not reported since the auditor discovered material weakness in Blyth’s internal control.

b. How does the 2003 audit report depart from the standard audit report? What is the purpose served by the departure(s)?

There are two significant departures from typical audit reports that forced PwC to give a qualified...