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Mr. Joel Hanson, City Administrator <br />City of Little Canada <br />October 13, 2005 <br />Page 2 <br />SAS 99 <br />In a continuing effort to improve audit quality and meet public expectations, the professional <br />standards for audit engagements have changed. Auditors are now required to perform new, <br />substantial audit procedures aimed at detecting material misstatements caused by fraud. <br />The new audit procedures include the following: <br />• Brainstorming session among all audit team members to discuss the potential for <br />material misstatements due to fraud. <br />• Interviews with management and non - accounting personnel within the entity. <br />• Tests of journal entries and other adjustments, accounting estimates and unusual <br />transactions <br />• Incorporate an element of unpredictability in audit procedures from year to year. <br />The above procedures are not a complete List of the additional steps required, but provides a <br />synopsis of the changes to audit procedures. Many of the new audit procedures require an <br />experienced auditor, such as a manager or partner. The combination of the additional <br />procedures and the need for an experienced auditor to complete them, increases audit fees. <br />Upon the approval of this agreement by your Board and execution, please return one copy to <br />our office and retain the other copy for your files. Your early consideration of this contract <br />will assist us in preparing our audit schedule and will be greatly appreciated. If you have any <br />questions, please don't hesitate to call. <br />Sincerely, <br />HLB TAUTGES REDPATH, LTD. <br />Mark C. Gibbs, CPA <br />MCG /bmj <br />()850 12.1 <br />3 <br />