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Memorandum No. 1077 /~ <br />August 1, 2007 (p <br />Page 5 of 7 <br />Designating a person on staff to review financial reports, adjustments, etc.: The AICPA's <br />discussion states that assigning this responsibility to a staff member is not, by itself, an adequate <br />internal control. The internal control lies within the process or procedure that is carried out by an <br />individual or third party to prevent, detect, and correct a potential misstatement. <br />Will the SAS No. 112 Report replace the Management Letter? First, audits performed under <br />Governmental Auditing Standards would not require a separate SAS No. 112 report since the Yellow <br />Book report would disclose any significant deficiencies and/or material weaknesses that are reported. <br />Units receiving Yellow Book audits could be presented additional findings (control deficiencies that <br />don't rise to the level of significant or material weaknesses) in a management letter. Second, audits <br />not performed under Governmental Auditing Standards would receive a SAS No. 112 letter if <br />significant deficiencies and/or material weaknesses exist as identified by the independent auditor. <br />Further, the auditor may list items that are considered control deficiencies, but not significant <br />deficiencies or material weaknesses, in the SAS 112 report or in a separate report. <br />For further information, please refer to Memorandum No. 1070 for additional details regarding SAS <br />No. 112 or please speak with your auditor with specific questions. If there are questions or <br />comments regarding this memorandum, please contact Amy Szalaj at (919) 807-2385 or <br />Amy. Szalaj@nctreasurer.com. <br />