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CITY OF PEQUOT LAKES, MINNESOTA <br />REQUIRED COMMUNICATIONS <br /> <br /> <br />2 <br />Generally accepted auditing standards (AU-C 260, The Auditor’s Communication With Those Charged With <br />Governance) require the auditor to promote effective two-way communication between the auditor and those charged <br />with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the <br />financial statement audit as well as observations arising from our audit that are significant and relevant to your <br />responsibility to oversee the financial reporting process. <br /> <br />Our Responsibilities With Regard to the Financial Statement Audit <br />Our responsibilities under auditing standards generally accepted in the United States of America and Government <br />Auditing Standards issued by the Comptroller General of the United States have been described to you in our <br />arrangement letter dated October 5, 2017. Our audit of the financial statements does not relieve management or those <br />charged with governance of their responsibilities, which are also described in that letter. <br /> <br />Overview of the Planned Scope and Timing of the Financial Statement Audit <br />We have issued a separate communication dated March 13, 2020 regarding the planned scope and timing of our audit <br />and have discussed with you our identification of, and planned audit response to, significant risks of material <br />misstatement. <br /> <br />Accounting Policies and Practices <br /> <br />Preferability of Accounting Policies and Practices <br />Under generally accepted accounting principles, in certain circumstances, management may select among alternative <br />accounting practices. In our view, in such circumstances, management has selected the preferable accounting practice. <br /> <br />Adoption of, or Change in, Accounting Policies <br />Management has the ultimate responsibility for the appropriateness of the accounting policies used by the City. The <br />City did not adopt any significant new accounting policies, nor have there been any changes in existing significant <br />accounting policies during the current period. <br /> <br />Significant or Unusual Transactions <br />We did not identify any significant or unusual transactions or significant accounting policies in controversial or <br />emerging areas for which there is a lack of authoritative guidance or consensus. <br /> <br />Alternative Treatments Discussed with Management <br />We did not discuss with management any alternative treatments within generally accepted accounting principles for <br />accounting policies and practices related to material items during the current audit period. <br /> <br />Management’s Judgments and Accounting Estimates <br />Accounting estimates are an integral part of the preparation of financial statements and are based upon management's <br />current judgment. The process used by management encompasses their knowledge and experience about past and <br />current events and certain assumptions about future events. You may wish to monitor throughout the year the process <br />used to compute and record these accounting estimates. The only estimates we have deemed significant to the <br />financial statements are the estimates associated with the following balances reported at year-end: <br /> Net pension liability/asset and related deferred inflows/outflows of resources <br /> Net OPEB liability and related deferred inflows/outflows of resources <br />