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October 3,2007 <br /> City of Pequot Lakes <br /> Page 3 <br /> Management is responsible for making all financial records and related information available to us and for the <br /> accuracy and completeness of that information. Management's responsibilities include adjusting the financial <br /> statements to correct material misstatements and for confirming to us in the representation letter that the <br /> effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to <br /> the latest period presented are immaterial, both individually and in the aggregate, to the financial statements <br /> taken as a whole, <br /> You are responsible for the design and implementation of programs and controls to prevent and detect fraud, <br /> and for informing us about all known or suspected fraud affecting the government involving <br /> (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud <br /> or illegal acts could have a material effect on the financial statements. Your responsibilities include informing <br /> us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in <br /> communications from employees, former employees, grantors, regulators, or others. In addition, you are <br /> responsible for identifying and ensuring that the entity complies with applicable laws, regulations, contracts, <br /> agreements, and grants and for taking timely and appropriate steps to remedy any fraud,illegal acts,violations <br /> of contracts or grant agreements,or abuse that we may report. <br /> Management is responsible for establishment and maintenance of a process for tracking the status of audit <br /> findings and recommendations. Management is also responsible for identifying for us previous audits or other <br /> engagements or studies related to the objectives discussed in the "Audit objectives"section of this letter.This <br /> responsibility includes relaying to us corrective actions taken to address significant findings and <br /> recommendations resulting from those audits or other engagements or studies. You are also responsible for <br /> providing management's views on our current findings, conclusions, and recommendations, as well as your <br /> planned corrective actions,and the timing and format related thereto. <br /> We will prepare a general ledger trial balance for use during the audit. Our preparation of the trial balance <br /> will be limited to formatting information in the City of Pequot Lakes general ledger into a working trial <br /> balance. As part of the audit we will prepare a draft of your financial statements and related notes. In <br /> accordance with Government Auditing Standards, you will be required to review, approve, and accept <br /> responsibility for those financial statements prior to their issuance and have a responsibility to be in a position <br /> in fact and appearance to make an informed judgment on those financial statements. Further,you are required <br /> to designate a management-level individual with suitable skill, knowledge, or experience to be responsible <br /> and accountable for overseeing our services. <br /> You may request that we perform additional services not contemplated by this engagement letter. If this <br /> occurs, we will communicate with you regarding the scope of the additional services and the estimated fees. <br /> You are responsible for management decisions and functions, and for designating a management-level <br /> individual with suitable skill, knowledge, or experience to oversee any additional services. You are <br /> responsible for evaluating the adequacy and results of the services performed and accepting responsibility for <br /> the results. You are also responsible for establishing and maintaining internal controls, including monitoring <br /> ongoing activities. <br />