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City of Paris August 10, 2004 Page 2 Audit Objectives (Continued) Internal control related to the financial statements and compliance with laws, regulations, and e provisions of contracts or grant agreements, noncompliance with which could have a material effect n the financial statements in accordance with Government Auditing Standards, Internal control related to major programs and an opinion (or disclaimer of opinion) on comp' ance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and aterial effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB ircular A-133, Audits of States. Local Governments. and Non-Profit Organizations, The reports on internal control and compliance will each include a statement that the report is intended fo the infonnation and use of management, specific legislative or regulatory bodies, federal awarding agencies, and if pplicable, pass- through entities and is not intended to be and should not be used by anyone other than these specified part es, ;f If engaged, our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of Circula A-133 and will include tests of accounting records, a determination of major program(s) in accordance with Circular -133, and other procedures we consider necessary to enable us to express such an opinion and to render the require reports, If our opinion on the financial statements or the Single Audit compliance opinion is other than unqualified, we'll fully discuss the reasons with you in advance, If, for any reason, we are unable to complete the audit or are unable to fonn or have not fonned an opinion, we may decline to express an opinion or to issue a report asa result of the engagemen . Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with he provisions of contracts, agreements, and grants, In fulfilling this responsibility, estimates and judgments by manageme t are required to assess the expected benefits and' related costs of the controls, The objectives of internal contro are to provid,e management with reasonable, but not absolute, assurance that assets are safeguarded against loss from u uthorized use or disposition, that transactions are executed in accordance with management's authorizations and rec ded properly to permit the preparation of financial statements in accordance with generally accepted accounting p , ciples, and that federal award programs are managed in compliance with applicable laws and regulations al1d the provi ions of contracts and grant agreements, Management is responsible for making all fmancial records and related infonnation available to us, e understand that you will provide us with such infonnation required for our audit and that you are responsible for e accuracy and completeness of that infonnation, We will advise you about appropriate accounting principles and the application and will assist in the preparation of your financial statements, including the schedule of expenditures of fi deral awards, but the responsibility for the financial st¡;¡.tements remains with you, That responsibility includes the stablishment and maintenance of adequate records and effective internal control over financial reporting and compliance the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for adj ting the fmandal statements to correct material misstatements and for confmning to us in the representation letter that e effects of any McCLANAHAN AND HOLMES. LLP