08 Appointing Auditor to conduct Independent Annual Audit

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City of Paris August 7,2007 Pagc 4 Aucht Procedures - Internal Controls (Continued) consider relevant to prevcnting and dctecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and matcrial effect on the financial statements. Tests of controls rclative to the financial statements are required only if control risk is asscssed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As requircd by OMf3 Circular A-133, wc will perform tcsts of controls to evaluate the cffectiveness of the design and operation of controls that we consider relevant to prevcnting or detecting material noncompliance with compliance requiremcnts applicable to each major federal award program. However, our tests will be less in scope than would be neccssary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. An audit is not dcsigned to provide assurance on internal control or to identify reportable conditions. However, we will inform you of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgmcnt, could adverscly affcct the entity's ability to record, process, summarize, and report financial data consistent with the assertions of administration in the financial statements. We will also infornl you of any nonreportable conditions or othcr matters involving intcrnal control, if any, as requircd by OMB Circular A-133. Audit Procedures - Compliance I f engaged, our audit will be conducted in accordance with the standards refened to in the section titled Audit Objectives. As part of obtaining reasonable assurance about whether the 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 agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on ovcrall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the City has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to maJor programs. Our procedures will consist of the applicable procedures described in the OMB Circular A-133 Compliance Supplemcnt for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. The purpose of those procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A- 133. Audit Administration, Fees, and Other W c encourage our clients to adopt the procedure of having their personnel prepare working papers and analyses for use McCLANAHAN AND HOLMES, LLP