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City of Paris <br />August 7, 2001 <br />Page 4 <br /> <br />Audit Procedures - Internal Controls (Continued) <br /> <br />and extent of our auditing procedures for the purpose of expressing our opinions <br />on the City's general purpose financial statements and on its compliance with <br />requirements applicable to major programs. <br /> <br />We will obtain an understanding of the design of the relevant controls and <br />whether they have been placed in operation, and we will assess control risk. <br />Tests of controls may be performed to test the effectiveness of certain controls <br />that we consider relevant to preventing and detecting errors and fraud that are <br />material to the general purpose financial statements and to preventing and <br />detecting misstatements resulting from illegal acts and other noncompliance <br />matters that have a direct and material effect on the general purpose financial <br />statements. Tests of controls relative to the general purpose financial state- <br />ments are required only if control risk is assessed below the maximum level. Our <br />tests, if performed, will be less in scope than would be necessary to render an <br />opinion on internal control and, accordingly, no opinion will be expressed in our <br />report on internal control issued pursuant to Government Auditing Standards. <br /> <br />As required by OMB Circular A-133, we will perform tests of controls to evaluate <br />the effectiveness of the design and operation of controls that we consider <br />relevant to preventing or detecting material noncompliance with compliance <br />requirements applicable to each major federal award program. However, our tests <br />will be less in scope than would be necessary to render an opinion on those <br />controls and, accordingly, no opinion will be expressed in our report on internal <br />control issued pursuant to OMB Circular A-133. <br /> <br />~ audit is not designed to provide assurance on internal control or to identify <br />reportable conditions. However, we will inform you of any matters involving <br />internal control and its operation that we consider to be reportable conditions <br />under standards established by the American Institute of Certified Public <br />Accountants. Reportable conditions involve matters coming to our attention <br />relating to significant deficiencies in the design or operation of the internal <br />control that, in our judgment, could adversely affect the entity's ability to <br />record, process, suramarize, and report financial data consistent with the <br />assertions of acLm/nistration in the general purpose financial statements. We <br />will also inform you of any nonreportable conditions or other matters involving <br />internal control, if any, as required by OMB Circulars A-133. <br /> <br />Audit Procedures - Compliance <br /> <br />If engaged, our audit will be conducted in accordance with the standards referred <br />to in the section titled Audit Objectives. As part of obtaining reasonable <br />assurance about whether the general purpose financial statements are free of <br />material misstatement, we will perform tests of the City's compliance with <br />applicable laws and regulations and the provisions of contracts and agreements, <br />including grant agreements. However, the objective of those procedures will not <br />be to provide an opinion on overall compliance and we will not express such an <br />opinion in our report on compliance issued pursuant to Government Auditing <br />Standards. <br /> <br />OMB Circular A-133 requires that we also plan and perform the audit to obtain <br />reasonable assurance about whether the City has complied with applicable laws and <br />regulations and the provisions of contracts and grant agreements applicable to <br />major programs. Our procedures will consist of the applicable procedures <br /> <br />MCCLANAHAN AND HOLMES. PLLC <br /> <br /> <br />