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

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April 26, 1999 Orange County,North Carolina Page 3 Our auditing 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 financial institutions. We will make audit inquiries and request written responses from the County's attorneys as part of the engagement,and they may bill the County for responding to this inquiry. As part of our audit of compliance with the requirements of major federal programs,we will obtain an understanding of the County's internal control related to administering major federal programs and we will assess risk as required by OMB Circular A-133 for the purpose of establishing the nature,timing, and extent of auditing procedures necessary for expressing an opinion concerning compliance with laws and regulations related to major federal and state award programs. As required by OMB Circular A-133 and the State Single Audit Implementation Act, our audit of compliance will also include tests of transactions related to federal and state award programs for compliance with applicable laws and regulations. However,because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud or illegal acts may exist and not be detected by us. We will advise you, however,of any matters of that nature that come to our attention, and will include such matters in the reports required for an audit in accordance with OMB Circular A-133. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that arise during any subsequent periods for which we have not been engaged as auditors or for which we have performed no substantive auditing procedures. The report on our understanding of the County's internal control and the assessment of control risk made as part of the County's general purpose financial statement audit will include(1)the scope of our work in obtaining an understanding of the County's internal control and in assessing the control risk and(2)the reportable conditions, including the identification of material weaknesses identified as a result of our work in understanding and assessing the control risk. In addition, we will render a report on illegal acts,as required,depending on the results of our audit procedures. We will complete and sign one copy of the auditor's information section of the Data Collection Form. County management must prepare all other sections of the form and sign the form prior to its submission to the Federal Bureau of the Census.