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City of Little Canada <br />Contract for Auditing Services <br />Page 3 <br />Audit Procedures — General <br />An audit includes examining, on a test basis, evidence supporting the amounts and <br />disclosures in the financial statements; therefore, our audit will involve judgment about the <br />number of transactions to be examined and the areas to be tested. We will plan and perforw <br />the audit to obtain reasonable rather than absolute assurance about whether the financial <br />statements are free of material misstatement, whether from errors, fraudulent financial <br />reporting, misappropriation of assets, or violations of laws or governmental regulations that <br />are attributable to the entity or to acts by management or employees acting on behalf of the <br />entity. Because an audit is designed to provide reasonable, but not absolute assurance and <br />because we will not perform a detailed examination of all transactions, there is a risk that <br />material misstatements may exist and not be detected by us. In addition, an audit is not <br />designed to detect immaterial misstatements or violations of laws or governmental <br />regulations that do not have a direct effect on the basic financial statements. However, we <br />will inforrrr you of any material errors that come to our attention and we will inform you of <br />any fraudulent financial reporting or misappropriation of assets that comes to our attention. <br />We will also inform you of any violations of laws or governmental regulations that come to <br />our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the <br />period covered by our audit and does not extend to matters that might arise during any later <br />periods for which we are not engaged as auditors. <br />Our procedures will include tests of documentary evidence supporting the transactions <br />recorded in the accounts, and may include tests of the physical existence of inventories, and <br />direct confirmation of receivables and certain other assets and liabilities by correspondence <br />with selected individuals, creditors, and financial institutions. We will request written <br />representations from your attorneys as part of the engagement, and they may bill you for <br />responding to this inquiry. At the conclusion of our audit, we will also request certain <br />written representations from you about the financial statements and related matters. <br />Identifying and ensuring that the City of Little Canada, Minnesota complies with laws, <br />regulations, contracts, and agreements is the responsibility of management. As part of <br />obtaining reasonable assurance about whether the basic financial statements are free of <br />material misstatement, we will perform tests of the City of Little Canada, Minnesota's <br />compliance with applicable laws and regulations and the provisions of contracts and <br />agreements. However, the objective of our audit will not be to provide an opinion on overall <br />compliance and we will not express such an opinion. <br />Audit Procedures — Internal Controls <br />In planning and performing our audit we will consider the internal control sufficient to plan <br />the audit in order to determine the nature, timing and extent of our auditing procedures for <br />the purpose of expressing our opinion on the City of Little Canada, Minnesota's basic <br />financial statements. <br />538937.1 <br />