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Mr. Joel Hanson City Administrator <br />City of Little Canada <br />September 30, 2003 <br />Page 2 <br />The new audit procedures include the following: <br />• Brainstorming session among all audit team members to discuss the potential for material <br />misstatements due to fraud. <br />• htterviews with management and non - accounting personnel within the city. (department <br />heads and others) <br />• Tests of journal entries and other adjustments, accounting estimates and unusual transactions <br />• Incorporate an element of unpredictability in audit procedures from year to year. <br />The above procedures is not a complete list of the additional steps now required, but provides a <br />synopsis of the changes to audit procedures. Many o'fthe new audit procedures require an <br />experienced auditor, such as a manager or partner. The combination of the additional procedures and <br />the need for an experienced auditor to complete them increases audit fees. <br />Our quote of $1,750 is our best estimate of the effort required to successfully meet audit standards. <br />We are proposing to complete the services described above for the following fee: <br />2002 2003 <br />Contract Base <br />Amount Fee SAS 99 Total <br />Financial and legal compliance audit $19,200 $19,200 $1,750 $20,950 <br />Less: reduction for management letter (1,500) (1,500) - (1,500) <br />Total $17,700 $17,700 $1,750 $19,450 <br />Percent increase <br />0.00% 9.10% 9.10% <br />Upon the approval of this agreement, please return one copy to our office and retain the other copy <br />for your files. If you have any questions, please don't hesitate to call. <br />Sincerely, <br />HLB TAUTGES REDPATH, LTD. <br />9 <br />Mark C. Gibbs, CPA <br />MCG /bmj <br />Enclosure <br />-3 <br />337550.1 <br />