Other Auditor Reports 12/31/2006

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NEW AUDITING STANDARDS There are two key new auditing standards that became effective for periods ending after December 15, 2006 and therefore, were applicable to this year's audit. All public accounting firms must comply with these standards, as issued by the American Institute of CPAs, when performing audits. Several of the requirements contained in these new standards significantly impacts the manner in which your audit is conducted and, potentially, on its costs and findings. In an effort to serve you better and continue to gain efficiency and understanding in the audit process, we have outlined some of the changes and their impact on your audit. STATEMENT OF AUDITING STANDARDS (SAS) 103: AUDIT DOCUMENTATION This standard addresses the format and content of the auditors' workpapers, documentation procedures and results. While you may not see these changes yourself, they will affect the time and effort we must put into your audit. You can help mitigate the effect of this standard on your organization with up -front planning and communications. • First, the standard tells us that: `The auditor's report should not be dated earlier than the date on which the auditor has obtained sufficient appropriate audit evidence to support the opinion." On the surface, this requirement does not seem much different from existing requirements; however, it has practical implications. A delay between the end of audit fieldwork and approval of draft financial statements can result in a change in the report date and require additional audit steps, such as updating attomey letters, reviewing additional board minutes and interim financial statements, extending subsequent receipts and disbursements testing, etc. for the intervening period. These additional steps would also be required if a significant adjustment were to be made to the financial statements, or information required in the footnotes were to be provided, after the initial fieldwork date. Specific Impact: The audit report date we used for the 2005 audit under the old standards was March 24, 2006, or essentially the last day of our on -site fieldwork. Under the new standard, the 2006 audit report date is May 30, 2007. The impact on the audit is a requirement to update certain procedures through this additional two months period between our March fieldwork and audit report date. • Second, we must now "lock down" audit files within 60 days of the issuance of the audit report. This will make workpapers inaccessible for changes. Practically, this means that late management responses can also cause the report date to change when they are incorporated into Single Audit findings or management letter comments, with similar implications for additional audit procedures and billings. The audit documentation requirements of SAS 103 may reinforce the common perception that auditors ask the same questions and make the same requests multiple times over the course of an annual audit engagement. The purpose of follow -up requests, however, are designed to affirm representations and ensure the completeness of the audit evidence documentation though our report date. SAS 103 encourages the auditor to corroborate oral representations by client management. Auditors will obtain audit evidence through inquiries of additional personnel and /or written documentation. Therefore, accessibility and responsiveness of all staff to auditor inquiries will be necessary to have an efficient audit. Corroborating information often resides outside the accounting office. For example, information obtained through direct inquiry of non - finance office personnel. Avoiding the effect of additional audit fees, the disruption associated with additional audit procedures and further report delays that may result due to lack of audit staff available to perform the unanticipated procedures requires clear communication of changes in audit circumstances and meeting schedules to all parties (auditor, management and audit committee)well in advance of audit wrap -up. (16)