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City of Ramse>' Pa~e 2 July 15, 1993 Our procedures w, ill include test 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 request written representations from ),our attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. 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. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. As required by the Single Audit Act of 1984, our audit will include tests of transactions related to federal assistance 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, irregularities, or illegal acts, including fraud or defalcations, ma), 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 a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during an), later periods for which we are not engaged as auditors. We understand that you will provide us with the hasic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the maintenance of adequate records and related internal control structure policies, the selection and application of accounting principles, and the safeguarding of assets. The assistance to be supplied by your personnel, including the preparation of schedules and analyses of accounts, typing all cash or other confirmations we request, and locating any invoices selected by us for testing, will be discussed and coordinated with you. Our audit is not specifically designed and cannot be relied on to disclose reportable conditions, that is, significant deficiencies in the design or operation of the internal control structure. However, during the audit, if we become aware of such reportable conditions or ways that we believe management practices can be improved, we will communicate them to you in a separate letter. Our fees for these services are based on time required by the individuals assigned to the engagement. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable upon presentation. " ,. '~ The following is the fee rate schedule and estimated hour requirements and a total not-to-exceed fee of $14,580. This estimate is prepared based upon the assumption thru the City prepared schedules will be completed by the time we start final fieldwork, that those schedules will agree to the trial balances, the schedules will be prepared accurately, and the financial statements will be proofed before sent to us for final review. This total fee would be reduced in the event that actual hours at the rates shown are less than $14,580. The fees will not exceed $14,580 unless unexpected circumstances are encountered - at which time we would discuss additional services m~d fees with you before proceeding. 15