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McGladrey& Pullen 3 <br />• Certified Publ'K Accrwrttants <br />• <br />April 23, 2007 <br />The Honorable Manager and Members <br />of the County Commisdoners <br />Orange County, North Carolina <br />P.O. Box 8181 <br />Hillsborough, North Carolina 27278 <br />Attention: Mr. Kenneth T. Chavious, Finance Director <br />w~ctaa~>r wnen, ur <br />230 North Elm St, Ste 1100. Greensboro, NC Z140F2436 <br />PA. Box 241D. Greensboro, NC 27402 2110 <br />0 336.213.4461 F 3362142519 <br />rrrrrrmcgladreycom <br />This letter is to explain our understanding of the arrangements for the services we are to perform for the Orange <br />County, North Carolina (`County") for the year ending June 30, 2007. We ask that you either confirm or amend this <br />understanding. <br />We will perform an audit of the County's govemmeMal activities, business-type activities, discretely presented <br />component unit, each major fund, and aggregate remaining fund information as of and for the year ending June 30, <br />2007 which cdlectively comprise the basic finandal statements. We understand that these. financial statements will <br />be prepared in acxordance with accounting principles generally accepted in the United States of America. The <br />objective of an audit of financial statements is to express an opinion on those statements. <br />We will also perform the audit of the County as of June 30, 2007 so as to satisfy the audit requirements imposed by <br />the Single Audit Act and the U.S. Office of Management and Budget (°OMB'~ Circular No. A-133 and the state of <br />North Carolina Single Audit Implementation Act. <br />We will conduct the audit in accordance with auditing standards generally accepted in the United States of America; <br />GovemmentAudting Standanis issued by the Comptroller General of the United States; the provisions of the Single <br />Audit Act, OMB Circular A-133 and OMB`s Compliance Supplement; and the State Single Audit Implementation Act. <br />Those standards, circulars, supplements or gu'ldes require that we plan and perform the audit to obtain reasonable <br />rather than absolute, assurance about whether the financial statements are flee of material misstatement whether <br />caused by error, fraudulent financial reporting, or misappropriation of assets. Accordingly, a material misstatement, <br />whether caused by error, fraudulent financial reporting, or misappropriation of assets, may remain undetected. An <br />audit indudes examining, on a test basis, evidence supporting the amounts and disclosures in the financial <br />statements. As a result, an audit is not designed to detect errors or fraud that are immaterial to the finandai <br />statements. An audit also includes assessing the accounting prindples used and significant estimates made by <br />management, as well as evaluatmg the overall financial statement presentation. We believe that our audit will <br />provide a reasonable basis for our reports. <br />In addition to our reports on the County's financial statements we will also issue the following reports or types of <br />reports: <br />A report on the fairness of the presentation of the County's schedule of expenditures of Federal and State awards <br />for the year ending June 30, 2007. <br />Reports on internal control related to the financial statements, and major programs. These reports will descn'be <br />the scope of testing of internal control and the results of our tests of internal controls. <br />• McGla~ey E PuNen, LLP is a member firm of R5M International - <br />an afilBafion of separate and independent legal entitres <br />