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City of Paris August 10, 2004 Page 4 Audit Procedures - Internal Controls (Continued) consider relevant to preventing and detecting errors and fraud that are material to the fmancial sta ments and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that ha e a direct and material effect on the financial statements, Tests of controls relative to the fmancial statements are r quired only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than wou d be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on nternal control issued pursuant to Government Auditing Standards. ' As required by OMB Circular A-B3, we will þerform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance 'th compliance requirements applicable to each major federal award program, However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our re ort on internal control issued pursuant to OMB Circular A-B3, '.t An audit is not designed to provide assurance on internal control or to identify reportable conditions. H wever, we will inform you of any matters involving internal control and its operation that we consider to be reportable c nditions under standards established by the American Institute of Certified Public Accountants, Reportable conditions' volve matters coming to our attention relating to significant deficiencies in the design or operation of the internal con 01 that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report fmancial data consistent with the assertions of administration in the fmancial statements, We will also inform you of any nonrepo able conditions or other matters involving internal control, if any, as required by OMB Circular A-B3, Audit Procedures - Compliance If engaged, our audit will be conducted in accordance with the standards referred to in the section titled A dit Objectives, As part of obtaining reasonable assurance about whether the financial statements are free of material 'sstatement, we will perfol:m tests of the City's compliance with applicable laws and regulations and the provisions f contracts and agreements, including grant agreements, However, the objective of those procedures will not be to provi e an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards, OMB Circular A-B3 requires that we also plan and perform the audit to obtain reasonable assurance a out whether the City has complied with applicable laws and regulations and the provisions of contracts and grant agreeme ts applicable to major programs, Our procedures will consist of the applicable procedures described in the OMB Circular A-B3 Compliance Supplement for the types of compliance requirements that could have a direct and material ffect on each of the City's major programs. The purpose of those procedures will be to express an opinion on the City's ompliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to 0 B Circular A. 133. Audit Adnñnistration. Fees. and Other We encourage our clients to adopt the procedure of having their personnel prepare working papers and nalyses for use during the audit in order to minimize the clerical activities of our professional staff and resulting added co t. If engaged, a list of work papers will be furnished which can be prepared by your personnel prior to'the fmal field work. McCLANAHAN AND HOLMES. LLP