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HomeMy WebLinkAboutProfessional Service Agreement with Balukoff Lindstrom & Co for Audit ServicesBALUKOFF LINDSTROM & Co., P.A. Certified Public Accountants 877 West Main Street, Suite 805 Boise, Idaho 83702 (208) 344-7150 FAX: (208) 344-7435 www.blco.com September 20, 2004 Stacy Kilchenmann City of Meridian 33 East Idaho Meridian, ID 83642 We are pleased to confirm our understanding of the services we are to provide for City of Meridian for the year ended September 30, 2004. We will audit the financial statements of the governmental activities and the business-type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the entity's basic financial statements of City of Meridian as of and for the year ended September 30, 2004. Also, the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the financial statements: Management's Discussion and Analysis. Audit Objectives The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the financial statements taken as a whole. Our audit will be conducted in accordance with U.S. generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the accounting records of City of Meridian and other procedures we consider necessary to enable us to express such an opinion. If our opinion on the financial statements is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. We will also provide reports (that do not include opinions) on internal control related to the financial statements and compliance with laws, regulations, and the provisions or grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with laws, regulations, contracts, and agreements. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. City of Meridian September 20, 2004 Page 2 Management is responsible for making all fmancial records and related information available to us. We understand that you will provide us with such 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 advise you in the preparation of your financial statements, but the responsibility for the financial statements remains with you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to your financial statements. You are responsible for reviewing the entries and understanding the nature of any proposed entries and the impact they have on the financial statements. 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. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the government involving (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations. City of Meridian accepts responsibility for the results of the services being provided and agrees to perform the following functions in connection with this engagement: a. Make all management decisions and perform all management functions. b. Designate a competent individual to oversee the services. c. Evaluate the adequacy and results of the services performed. d. Accept responsibility for the results of the services. e. Establish and maintain internal controls, including monitoring ongoing activities. Audit Procedures-General 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 rather than absolute assurance about whether the fmancial statements are free of material misstatement, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors that come to our attention, and we will inform you of any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by City of Meridian September 20, 2004 Page 3 our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. We have advised you of the limitations of our audit regarding the detection of fraud that is immaterial to the financial statements (including immaterial misappropriation of cash or other assets). In addition, we have advised you of the limitations of our audit regarding the detection of inappropriate travel and meal expenses, and inappropriate officer reimbursements that are immaterial to the fmancial statements. We have offered to perform other agreed-upon procedures specifically designed to detect such items for an additional fee. Although you understand the limitations of our audit, you do not wish to engage us to perform any such additional procedures at this time. 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, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and fmancial institutions. We will request .written representations 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 require certain written representations from you about the financial statements and related matters. Identifying and ensuring that City of Meridian complies with laws, regulations, contracts, and agreements is the responsibility of management. As part of obtaining reasonable assurance about whether the fmancial statements are free of material misstatement, we will perform tests of City of Meridian's compliance with applicable laws and regulations and the provisions of contracts and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion. Audit Procedures-Internal Controls In planning and performing our audit, we will consider the internal control sufficient to plan the audit in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinion on City of Meridian's financial statements. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting 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 material effect on the financial statements. Tests of controls are required only if control risk is assessed 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. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the governing body or audit committee 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 judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of City of Meridian September 20, 2004 Page 4 any non-reportable conditions or other matters involving internal control, if any, as required by Government Auditing Standards. Audit Administration, Fees, and Other We understand that your employees will prepare all cash or other confirmations we request and will locate any invoices selected by us for testing. The workpapers for this engagement are the property of Balukoff Lindstrom & Co. P.A. and constitute confidential information. However, we may be requested to make certain workpapers available to the cognizant agency pursuant to authority given to it by law or regulation. If requested, access to such workpapers will be provided under the supervision of Balukoff Lindstrom & Co. P.A. personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to the cognizant agency. The cognizant agency may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. Our fee for these services will be at our hourly rates plus out-of-pocket costs, if any. Our hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. We estimate the fee for the audit will be $26,500. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards require that we provide you with a copy of our most recent quality control review report. Our 2003 peer review report accompanies this letter. We appreciate the opportunity to be of service to City of Meridian and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement. as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, ~~, iz Sw~ Kevin R. Smith RESPONSE: ~\`~ ``~ ~ ~~ ,,~~,dian. This letter correctly sets forth the understa ~'~ ~ ~ O By: ~ ~_ ' Date: 9' 't7~ ~ S~'iALyj f~e~/ ~~ ~ ~`" '% "qp car ~s~ • 4~~,,~' HANSEN~ BARNEI'T c~C MAXWELL A Professional Corporation CERTIFIED PUBLIC ACCOUNTANTS October 9, 2003 To the Shareholders of Balukoff, Lindstrom & Co., P. A. and the SEC Practice Section Peer Review Committee tsoll s3z-z2oo Far (801) 532-7444 5 Triad Center, Suite 750 Salt Lake City, Utah 84180-1 l28 tvwtiv.hbmcpas.com We have reviewed the system of quality control for the accounting and auditing practice of 8alukoff, Lindstrom & Co., P. A. (the firm) in effect for the year ended June 30, 2003. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (the AICPA). The design of the system, and compliance with it, are the responsibilities of the firm. In addition, the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on the design of the system, and the .firm's compliance with that system and tl~e Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section and included procedures to plan and perform the review that are summarized in the attached description of the peer review process. O.ur review would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it or with the ,tembership requirements of the Section since it was based on selective tests. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a syste-n of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of Balukoff; Lindstrom & Co., P. A. in effect for the year ended June 30, 2003, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by tl,e AICPA, and was complied with during the year then ended to provide the firm with reasonable assurance of complying with professional standards. Also, in our opinion, the firm complied during that year with. the membership requirements of the Section in all material respects. As is customary in a peer review; we have issued a letter under this date that sets forth a comment relating to certain policies and procedures or compliance with them. The matter described in the letter was not considered to be of sufficient significance to affect the opinion expressed fil this report. ~. HANSEN, BAR1~IETT & MAXWELL ,~,.r.,:,,,.:me~, m Memlxr of AICPA Division of Firms B A~KE R T I L LY ivlember of SECPS INTERNATIONAL HANSEN~ BARNETT & MAXWELL A Professional Corpora0on CERTIFFIED PUBLIC ACCOUNTANTS To the Shazeholders of Balukoff, Lindstrom & Co., P. A. and the SEC Practice Section Peer Review Committee (801)532-2200 Fax (801)532-7944 5 Triad Ceater, Suite 750 Salt Lake City, Utah 84180-1128 www.hbmcpas.com October 9, 2003 We have reviewed the system of quality control for the accounting and auditing practice of Balukoff, Lindstrom & Co., P. A. (the firm) in effect for the yeaz ended June 30, 2003, and have issued our report thereon dated October 9, 2003. The matter described below was not considered to be of sufficient significance to affect the opinion expressed in that report, which should be read in conjunction with this letter. Engagement Performance Comment-The firm's quality control policies and procedures require the owner to review audit reports prior to issuance. Such review should be extensive enough to verify that the reports aze presented in conformity with professional standards. In our review of a few audit reports issued by the firm, circumstances required slight modification of the audit report to be in compliance with professional standazds and the fnTn did not make the required notations. We did satisfy ourselves that the missing notations did not make the fmancial statements, when considered with all disclosures that were made to be misleading. Recommendation-The firm should reemphasize the need to comply with its policies and procedures related to the owner review of audit reports prior to issuance. The owners should be instructed to conduct the review to verify that any special circumstances that require modification of the audit report aze addressed to be in conformity with professional standazds. ems--, ~ ,~ , HANSEN, BARNETT & MAXWELL e.,..e..~ m.me., .~ Member of AICPA Division of Firms BAKER TILLY INTERNATIONAL Member of SECPS