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City of St. Anthony, Minnesota <br />Engagement Letter <br />November 3, 2005 <br />Page 4 <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 />rrurnber 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 rnatclral misstatement, whether from (1) error, (2) fraudulent financial <br />reporting, (3) misappropriation of assets, or (d) violations of laws or govern rental <br />regulations that. are altributable to the entity or to acts by management or employees acting on <br />behalf of the entity. Because the determination of abuse is subjective, Government Anditi.n , <br />Standards do not. expect auditors to provide reasonable assurance on detecting abuse. <br />Because an audit is designed to provide reasonable, but not absolute assurance in(] because <br />we will not perform a detailed exanunation of all transactions, 111cre is a fish that material <br />wisstatemcras may exist and not be detected by us. In addition, an audit is not designed to <br />detect: iunnauerial nusst.atemenis or violations of laws or governmental regulations dial do not <br />have a direct and material effect on the fuiancial statements However, we will inform you of <br />any material errors that come to our attention and we will inform you of any fraudulent <br />financial reporting or misappropriation of assets that comes to our attention. We will also <br />inform you of any violations of .taws or governmental regulations that come to our attention, <br />unless clearly inconsequential. Our responsibility as auditors is limited to the period covered <br />I <br />y our audit and does not extend to matters that might arise during any latter periods for <br />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 written <br />representations from you about the financial statements and related matters. <br />Identifying and ensuring that the City of St. Anthony, Minnesota complies with laws, <br />regulations, contracts, and agreements is the responsibility of management. As part of <br />obtaining reasonable assurance about whether the financial statements are free of material <br />misstatement, we will perform tests of the City of St. Anthony, Minnesota's compliance with <br />applicable laws and regulations and the provisions of contract and agreements. However, the <br />693090.1 <br />W <br />