1999 S Audit Contract for Fiscal Year Ending June 30, 1999

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April 26, 1999 Orange County,North Carolina Page 2 Audit of General Purpose Financial Statements We will audit the County's general purpose financial statements as of and for the year ending June 30, 1999. In addition,we will audit the County's compliance with laws and regulations related to federal and state awards; and report on the County's Schedule of Expenditures of Federal and State Awards. Our audits will be conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States, Office of Management and Budget("OMB") Circular A-133,Audits of States, Local Governments and Non profit Institutions, and the State Single Audit Implementation Act. We will plan and perform our audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement, whether caused by error or fraud, and we will perform tests of the County's compliance with certain provisions of laws, regulations, contracts and grants. However,because of the characteristics of fraud,particularly those involving concealment and falsified documentation(including forgery), a properly planned and performed audit may not detect a material misstatement. Therefore, an audit conducted in accordance with generally accepted auditing standards is designed to obtain reasonable,rather than absolute,assurance that the general purpose financial statements are free of material misstatement. An audit is not designed to detect error or fraud that is immaterial to the general purpose financial statements or to detect immaterial instances of noncompliance. As part of our audit,we will consider the County's internal control and assess control risk,as required by generally accepted auditing standards and Government Auditing Standards, for the purpose of establishing a basis for determining the nature,timing, and extent of auditing procedures necessary for expressing an opinion on the general purpose financial statements, and not to provide assurance on the County's internal control or to identify reportable conditions. 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. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.