2005 S Finance - Cherry, Bekaert & ITolland, L.L.P Audit Contract for the June 30, 2005 Fiscal Year

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RESPONSIBILITIES AS TO INTERNAL CONTROLS As a part of our audit, we will consider the entity's internal control structure, as required by auditing standards generally accepted in the United States of America and Government Auditing Standards, sufficient to plan the audit and to determine the nature, timing, and extent of auditing procedures necessary for expressing our opinion concerning the basic financial statements. You recognize that the basic financial statements and the establishment and maintenance of an effective internal control over financial reporting are the responsibility of management. You also recognize that management is responsible for identifying and ensuring that the entity complies with the laws and regulations applicable to its activities. Appropriate supervisory review procedures are necessary to provide reasonable assurance that adopted policies and prescribed procedures are adhered to and to identify errors, fraud, or illegal acts. An audit is not designed to provide assurance on internal control. As part of our consideration of the entity's internal control structure, however, we will inform you of reportable conditions and other matters that come to our attention that represent significant deficiencies in the design or operation of the internal control structure, if any, as required by OMB CircularA-133 and the State Single Audit Implementation Act. As required by OMB Circular A-133 and the State Single Audit Implementation Act, we will perform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements, applicable to each major federal and State 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 report on internal control issued pursuant to OMB Circular A-133 and the State Single Audit Implementation Act. You are also 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 entity 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 company received in communications from employees, former employees, regulators, or others. RESPONSIBILITIES AS TO COMPLIANCE Our audit will be conducted in accordance with the standards referred to in the section Summary of Services. As part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we will perform tests of the entity's compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Voa~emmentAuditing Standards. OMB Circular A-133 and the State Single Audit Implementation Act requires that we also plan and perform the audit to obtain reasonable assurance about whetherthe auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB Circular A-133 Compliance Supplement and the Audit Manual for Governmental Auditors in North Carolina for the types of compliance requirements that could have a direct and material effect of each of the entity's major programs. The purpose of those procedures will be to express an opinion on the entity's compliance with requirements applicable to major programs in our report on compliance issued pursuant toOMB CircularA-133 and the State Single Audit Implementation Act.