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City of St. Anthony, Minnesota Engagement Letter November 3, 2005 Page 3 assist in the preparation of your financial statements, but the responsibility for the financial statements remains will) you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to your financial statements. You are responsible for reviewing t:he entries and 'understanding the nature of any proposed entries and the impact they have on the financial statements. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and lite safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confinning to us in the representation letter that tha effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to tile latest period presented are rmmateriai, both lndlvidualiy and in the aggregate, to i1c. financial statements taken as a whole. You at'e z'esponsible for the design and nnplcrnentation of prograins and controls to prevent: and detect fraud, and for informing us aboul, all known or suspected fraud or illegal acts affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. You are also responsible for informing its of your knowledge of any allegations of fraud or suspected fraud, or illegal acts affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that. the entity complies with applicable laws and regulations, and for taking timely and appropriate steps to remedy any fraud, illegal acts, violation of contracts or grant: agreements, or abuse that we may report. With regard to the clecironic dissemination of audited financial statements, including financial statements published electronically on your website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information .in the electronic site with the original document. As part of the audit, we will prepare a draft: of your financial statements and related notes. In accordance with Government Auditing Standards, you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further you are required to designate a qualified managernent-level individual to be responsible and accountable for overseeing our services. 693090.1 M