03.07 - LarsonAllen Audit Services for 2011 Audit

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L November 7, 2011 Honorable Mayor and Council Members The City of Pequot Lakes 4638 Co Rd 11 Pequot Lakes, MN 56472 We are pleased to confirm our understanding of the services we are to provide the City of Pequot Lakes ( "you" or "your") for the year ended December 31, 2011. Scope We will audit the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the basic financial statements of the City of Pequot Lakes as of and for the year ended December 31, 2011. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD &A), to supplement the City of Pequot Lakes' basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB) who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the City of Pequot Lakes' RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by U.S. generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1. Management's discussion and analysis. 2. Budgetary comparison schedules. 3. Schedule of funding progress — other postemployment health care benefits. We have also been engaged to report on supplementary information other than RSI that accompanies the City of Pequot Lakes' financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole. Combining and individual fund statements.