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RCH Mr James DIPietro, City Manager July 29, 199M Page 2 An audit is not designed to providc assurancc on internal control or to identify all rcportable conditions. However, we will inform you of any mattcrs involving intcrnal control and its operation that we considcr to be reportable conditions under standards established by thc American Institute of Certified Public Accountants. Reportable conditions involvc matters coming to our attcntion rclating to significant deficiencies in thc design or operation of the intcrnal control that, in our judgmcnt, could advcrsely affect the entity's ability to record. process, summarize, and rcport financial data consistcnt with the asscrtions of management in the general purpose financial statements. Idcntifying and ensuring that the City complies with laws, regulations, contracts, and grant agreements applicable to the City is the responsibility of the City's management. As part of obtaining reasonable assurance about whcther the general purpose financial statements are free of material misstatement, we will perform tests of the City's compliance with applicable laws and regulations and the provisions of contracts and grants. However, the objcctivc of our audit will not be to provide an opinion on overall compliance with such provisions, and we will not express such an opinion. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, if any, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representation from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable assurance rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or other illegal acts may exist and not be detected by us. However, we will inform you of any material errors and any fraud that come to our attention. We will also inform you of any other illegal acts that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to l.he period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. 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 the safeguarding of assets. We understand that your employees will prepare all cash or other confirmations we request and will locate any invoices selected by us for testing.