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Mr. Joel Hanson, City Administrator <br />City of Little Canada <br />October 13, 2005 <br />Page 3 of 6 <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 perform <br />the audit to obtain reasonable rather than absolute assurance about whether the financial <br />statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial <br />reporting, (3) misappropriation of assets, or (4) violations of laws or governmental <br />regulations that are attributable to the entity or to acts by management or employees acting <br />on behalf of the entity. Because an audit is designed to provide reasonable, but not absolute <br />assurance and because we will not perform a detailed examination of all transactions, there is <br />a risk that material misstatements may exist and not be detected by us. In addition, an audit <br />is not designed to detect immaterial misstatements or violations of laws or governmental <br />regulations that do not have a direct and material effect on the financial statements. <br />However, we will inform you of any material errors that come to our attention and we will <br />inform you of any fraudulent financial reporting or misappropriation of assets that comes to <br />our attention. We will also inform you of any violations of laws or governmental regulations <br />that come to our attention, unless clearly inconsequential. Our responsibility as auditors is <br />limited to the period covered by our audit and does not extend to matters that might arise <br />during any later 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 complies with laws, regulations, <br />contracts, and agreements is the responsibility of management. As part of obtaining <br />reasonable assurance about whether the financial statements are free of material <br />misstatement, we will perform tests of the City of Little Canada's compliance with applicable <br />laws and regulations and the provisions of contracts and agreements. However, the objective <br />of our audit will not be to provide an opinion on overall compliance with such provisions and <br />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 <br />plan the audit in order to determine the nature, timing and extent of our auditing procedures <br />for the purpose of expressing our opinion on the City of Little Canada's financial statements. <br />An audit is not designed to provide assurance on internal control or to identify reportable <br />conditions. However, we will inform the governing body or audit committee of any matters <br />6 <br />52.1542.1 <br />