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HomeMy WebLinkAboutProfessional Services Agreement with Balukoff Lindstrom for Audit of Financial Statements for Quality Controls: ~ i ~ , e ti ~:.. ,,. BALUKOFF 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 October 8, 2002 Mayor Robert Corrie City of Meridian 33 East Idaho Meridian, ID 83642 Dear Mayor Corrie: We are pleased to confirm our understanding of the services we are to provide City of Meridian for the year ended September 30, 2002. We will audit the general purpose financial statements of City of Meridian as of and for the year ended September 30, 2002. We understand that the financial statements will be presented in accordance with the financial reporting model in effect prior to that described in GASB Statement No. 34. 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 general purpose financial statements: 1. General Fund Statements of Revenues and Expenditures -Budget and Actual 2. Enterprise Fund Statements of Revenues and Expenditures -Budget and Actual 3. Operation in Tax Rolls Audit Objectives The objective of our audit is the expression of an opinion as to whether the general purpose 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 general purpose 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 general purpose 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 financial statements and compliance with laws, regulations, and the provisions of grant agreements, City of Meridian October 8, 2002 Page 2 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 general purpose financial statements in accordance with generally accepted accounting principles. Management is responsible for making all financial 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 assist in the preparation of your general purpose financial statements, but the responsibility for the general purpose financial statements remains with you. 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 general purpose financial statement 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 general purpose financial statements taken as a whole. 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 financial statements are free of material misstatement, whether caused by error or fraud. 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 a material misstatement (whether caused by error or fraud) or illegal acts may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements, immaterial illegal acts, or illegal acts that do not have a direct effect on the financial statements. However, we will inform you of any material errors that come to our City of Meridian October 8, 2002 Page 3 attention and any fraud that comes to our attention. We will also inform you of any illegal acts that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by 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 the misappropriation of cash or other assets). We have offered to perform other agreed-upon procedures specifically designed to detect such immaterial fraud for an additional fee., Although you understand the limitations for 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 direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial 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 general purpose financial 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 opinions on City of Meridian's general purpose 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 general purpose 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 general purpose 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. City of Meridian October 8, 2002 Page 4 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 general purpose financial statements. 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 audit 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 a cognizant audit agency: The cognizant audit 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. 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 $26,200. Additional procedures performed to assist with closing and reconciliation of account balances will be billed at our standard hourly rates. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards require that we provide you with a copy of our most recent quality control review report. Our 2000 peer review report accompanies this letter. We appreciate the opportunity to be of service to City of Meridian and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please City of Meridian October 8, 2002 Page 5 let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, ,~eti- Kevin R. Andersen RESPONSE: ~\~~,ti~, ~ ~ ~ ~ ~ ~ ~ ~,,,,1~~~ This lette ctly sets forth the understanding of City of Me~`i~. ~oRP~;~ T ~.~~, ~.,~` ~~ ~O Title: ~ '~~' r r ~~~~ ~~ Date: ~ U ._Z-- ~y"'~iir,~~iJ~'~Y • `~,t``~~~ frrra~F~f ~t%s'y~t~"~ ,~~ /0 -`S-OZ k~aN~l~~v. BiA:RNETT c~.11~Axwli~: . A 8tutf~ionRt corptxa4iun CW~iTiB'lED YEt~t,[C ACL;GJNtFA:YFs ~d31) 532.22UU ?kleruLcr ~>CAtCPA 131i4iarnu of Firms Fax ZR(13) S!'b'7944 lylembernf:SECNS 115 Fias[$;paclway. Swtt'.•~ fltemtie~• of Summit Eniernaoar>81.A65opatee Ss2r i,akcfiry. Gtxh 84l ] 1 2+5?Y.+ Sept~snber S; 2GO.Ct To the Shareltotders. 13clulcaff I,intlstrorn Fk t;t]., P.A. We have ]e:~ewecl the system of quality control For tine accot]trtis]g and auditing practice t?f Bslukoff, €;ind~trortt 6c C.o;, P.A..: Lthr• fnn j i:l effect for the year ende3 .ln]a~ 30, ~~.0: A system of quality cautsal encompasses rt]e firm's arganizatiana! structinre anal the policies adopted and. prt?ceduz~es estAbliszed W provide it with t'easonable a.RSarat]ce cf complyitt~, with professibrial stsndattis: T7ts elemes]ts n!` quality cont]al are described in then Stare]tients an puallty %at]tml Standards ssued'by d~ Amerietia:Iitstitute of Certified l•'ublic Aceuuntants (the "AIc~FA"j. The desig]t of the syste]i], anil catnpTuu-ee ivitb it, are t13e responsibilities of the fimt::ln sdditiun; the Sinn. has agreed to coc]ply with the membership t~qu:it'emettts rzf the SEC Practice Section iaf the aICF}i. Division far GF"A. Firms (the< Section j. t.)^r reupansiF!iliry is to express an opiriinn on the design oFtl]e syst,^r]3, and t~:e firm's car]]plia]]u; with ihnt system and tli~ 5ectio>i's memhcrsltipxequiremerts based ern our rewt~a. t?ur review was wnducted i]i acct~rdanc~ with stancltirds established by the Fees R.evievr C:ortemitiee of the Section:. Irt perfor]nit]o our review, we obtaiz-ed an undersi:xuid:i]ig. n#'t?]e system u~f.qual]ty control for the iimt's accounting at]d auditing practice .Fn adclitio]i; we resteii ce]mpiianad .vtith the rum's quality control tiolicics and proceili]res and w~tli the ]rientbersht}~ requirt5me]]ts ortfte Section to tJie extentwe ecnsdered sppropciate. These tesLg covered the applicstiun tit the firt"t's policies and procedures an se).ected ettghgerntittis. ftexat]se our review was banecl oei seleetiR: tors; it svoulc! aot naeesstu•iiy disclt]se all vreuknes.~ in the system of quality cun#rcil or al] instar.¢rs of lavlt of compliance v~th it Y with: the rneml~ership re~uiretrteTtts a~f the Section., because there are inherent limitatiaas in the effect veaess of any system of quality cottixol, departures fiom ~r s}~strjtc- may ocwr.aEtd not be d~ste+cicd.: ~1.1sn, F-rajcctin]] of a]r„v evaluation t]f a s~~stam: nfgtutliity control t;> future periods is su$jeat to the risk that the system af.qu2tity cotttml tray becurue iitsiiequat$ because of changes in auditions, or'that the'degree of eaitipllance with the policies or pmcedt:res main ceteraoiacta, in our t~ini:on, Elie sy~tcm of gt]alty eauarol For the accounting and .auditing prsctictr of ~alttkoff, tiittdstrc]m RR eru!,, F:A. is effect f+~r the year end~i 7tuie 3Q, 2D00, has been deigned to meet:ihe ret~uirelrienb of the quality eontrel standards fur an accoutrting: surd auditing practice estab3ished by the ~CP~., and was t;ontlslrxl with during the year then cn]lad.~ provide cite ;firm with rex~sonahie assurl]iice of complying tivi`h professiortal.standards:Al~o, in t]ur apinio]], the firm bas complied with the ]oembersliiy requirements oc"the 5s~tion tit ail material reslreats.