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City of Falcon Heights January 13, 2003 Page 2 • Management Responsibilities Management is responsible for establishing and maintaining internal control and for coin with laws, regulations, contracts, and agreements. In fulfilling this responsibility Pliance judgments by management are required to assess the expected benefits and related cos controls. The objectives of internal control are to provide mana ement ~ estimates and absolute, assurance that assets are safeguarded against loss from unauthorized is of the that transactions are executed in accordance with mana e g wrth reasonable, but not properly to permit the preparation of general purpose financial stateme use or disposition, g ment's authorizations and recorded generally accepted accounting principles. nts in accordance with Management is responsible for making all financial records and related information av us. We understand that you will provide us with such information required for our audit and you are responsible for the accuracy and completeness of that information. Table to about appropriate accountin that Your' financial statements; butthe esponsibil ty forplthe $nanca wrll assist in the irl advise you That responsibility includes the establishment and maintenance of ade uat I? eParation of ial statements remains with you. internal control over financial reporting, the selection and application of accountin the safeguarding of assets. Management is responsible for ad'ustin q e records and effective correct material misstatements and for confirnung to us in the r resentati g Principles, and of any uncorrected misstatements aggregated by us durin , g the financial statements to eP on letter that the effects to the latest period presented are immaterial, both individual) e d n the gagement and pertaining pwpose financial statements taken as a whole: Y ggregate, to the general . Audit Procedures -General An audit includes examining, on a test basis, evidence supporting the amounts and di the financial statements; therefore, our audit will involve ud sclosures in transactions to be examined and the areas to be tested. We will planenandbpe otnn ~teunaber of obtain reasonable rather than absolute assurance about whether the financial statements udrt to matenal misstatement, whether caused from errors, ~'e free of misappropriation of assets, or violations of laws or governrnentalaredgul tions that are at eportrng, to the entity or to acts by management or employees acting on behalf of the enti tributable ty. Because an audit rs designed to provide reasonable, but not absolute assurance and because we perform a detailed examination of all transactions, there is a risk that a material misstateme exist and not be detected b us. will not Y In addition, an audit is not designed to detect immaterial misstatements, or violations of laws or governmental regulations that do not have a material effect on the general purpose financial statements. However, we will inform douect and material errors that come to our attention, and we will inform you of any fraudulent fin f any reporting or misappropriation of assets that come to our attention. We will also inform ou o cial violations of laws or governmental regulations that come to our attention unles f anY inconsequential. Our responsibility as auditors is limited to the ~ s clearly does not extend to matters that might arise Burin Period covered by our audit and as auditors. g any later periods for which we are not engaged Our procedures will include tests of documentary evidence supportin the tr g ansactions recorded in the accounts, and may include tests of the physical existence of inventories an d direct