Loading...
HomeMy WebLinkAboutDavis Hammon, Mendocino Emergency Services Authority Audit, 1999-04-15Davis W. Hammon, Jr., CPA DAVIS HAMMON & CO. (1924-1989) Certified Public Accountants O ~ Stephen B. Norman, CPA • PFS Stephen J. Herr, CPA ~Ju u u April 15, 1999 Mendocino Emergency Services Authority % City of Ukiah 300 Seminary Avenue Ukiah, California 95842 We are very pleased to confirm our understanding of the services we are to provide as an extension to our previous engagement letter dated October 5, 1998. Under the terms of this extension, we will continue to provide audit services to the Mendocino Emergency Services Authority (Authority) for the year ended June 30, 1999, and the subsequent four (4) fiscal years ending June 30, 2000, 2001, 2002 and 2003. Specifically, we will audit the financial statements of the Mendocino Emergency Services Authority as of and for the year ended June 30, 1999, and the subsequent four (4) fiscal years. Audit Objectives The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles. Our audits will be conducted in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the accounting records of the Authority and other procedures we consider necessary to enable us to express such an opinion. If our opinion is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audits or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. We will also provide reports (that do not include opinions) on internal control related to the financial statements and compliance with laws, regulations, and the provisions or grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. Management Responsibilities Management is responsible for establishing and maintaining an internal control structure and for compliance with the provisions of contracts, agreements, and grants. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related cost of controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with MEMBERS: AMERICAN INSTITUTE AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS 2080 Mvers Street. Oroville. CA 95966-5341 (530) 533-3392 FAX (530) 533-2714 DAVIS HAMMON & CO. Certified Public Accountants 0 management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with such information required for our audit and that you are responsible to the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation your financial statements, but the responsibility for the financial statements remains with you. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting and compliance, the selection and application of accounting principles, and the safeguarding of assets. Audit Procedures - General 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 examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. 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, may exist and not be detected by us. In addition, an audit is not designed to detect errors, fraud, or other illegal acts that are immaterial to the financial statements. However, we will inform you of any material errors and any fraud that comes to our attention. We will also inform you of any other illegal acts that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audits and does not extend to matters that might arise during any periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical evidence of inventories, and other 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 your attorneys as part of this engagement. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. Identifying and ensuring that the Authority complies with laws, regulations, contracts, and agreements is the responsibility of management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the Authority's compliance with applicable laws and regulations and the provisions of contracts and agreements. However, the objective of our audits will not be to provide an opinion on overall compliance and we will not express such an opinion. DAVIS MAMMON & CO. n Certified Public Accountants O u u An audit of the financial statements performed in accordance with generally accepted auditing standards is not designed to determine whether the computer systems of the Authority are year 2000 compliant, or to provide any assurance an whether the Authority has addressed all of the affected systems on a timely basis. Further, we have no responsibility with regard to the systems of vendors, service providers, or any third parties. These are responsibility of management. However, we may choose to communicate matters that come to our attention relating to the Year 2000 issue. Audit Procedures - Internal Control In planning and performing our audits, we will consider the internal control sufficient to plan the audits in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinions on the Mendocino Emergency Services Authority's financial statements. We will obtain an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain policies and procedures that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls relative to the financial statements are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the governing body or audit committee of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Audit Administration Fees an Other The Mendocino Emergency Services Authority and Davis Hammon & Co. retain the right to unilaterally cancel this agreement, without cause, in years subsequent to June 30, 1999, by providing written notification to the other party at least five (5) months prior to June 30, each year. DAVIS IMMMON & CO. co Certified Public Accountants ~ The workpapers for this engagement are the property of Davis Hammon & Co. and constitute confidential information. However, we may be requested to make certain workpapers available to the State Controller's Office pursuant to authority given to it by law or regulation. If requested, access to such workpapers will be provided under the supervision of Davis Hammon & Co. personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to the State Controller's Officer. The State Controller's Office may intend, or decide, to distribute the photocopies or information contained therein to others, including other government agencies. We will be available throughout the year to consult with you on the accounting effects of any proposed transactions or contemplated changes in business policies. Our key personnel will usually be available, with 24 hours notice, for consultation. Annually, we will begin preliminary audit work for each the fiscal year in June. We will begin final audit work in August or September, and anticipate completion of field work by October 31. Barring any unforeseen circumstances, we will prepare and issue draft copies of the audit reports and management recommendations, and any other relevant documentation, by November 30. We anticipate delivery of ten (10) completed copies of the final reports by December 15. The maximum annual fees stipulated below contemplate that conditions satisfactory to the normal progress and completion of the examination will be encountered and that the Authority's accounting personnel will furnish necessary accounting records, documents, minutes and legal rulings for auditors inspection. However, if unusual circumstances are encountered which would make it necessary for us to do additional work, we shall report such conditions immediately to the responsible Authority officials and both parties may negotiate such additional compensation as appears justified. The Authority may request our firm to perform financial analysis, accounting and auditing services in addition to those which are usual and customary in making an examination of the financial statements. If so, our firm shall be compensated for any such services performed, which are authorized, at our standard rates. However, if such additional services require the expertise of consultants, auditors and the Authority may negotiate separate rates and estimated fees for the work contemplated. Our fee for audit services will be at our regular hourly rates plus out-of-pocket expenses. However, our fee will not exceed the amounts set forth below: 1999 2000 2001 2002 2003 Annual Audit $2,700 $2,800 $2,900 $3,000 $3,100 DAVIS I AMMON & CO. Certified Public Accountants o~ ~_~u u u As required by Government Auditing Standards, we are providing you with a copy of our most recent quality control review report. Our 1997 peer review report accompanies this letter. Mr. Stephen J. Herr is authorized to make presentations for Davis Hammon & Co. This proposal is an irrevocable offer for a period of 60 days from the date of issuance, April 15, 1999. Mr. Herr a partner of Davis Hammon & Co. and can be reached at 2080 Myers Street, Oroville, California 95966, telephone (530) 533-3392. Mr. Herr is authorized to sign this proposal and is authorized to bind Davis Hammon & Co. without exception. We appreciate the opportunity to be of continued service to the Mendocino Emergency Services Authority and believe this letter accurately summaries the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms as described in this letter, please sign the enclosed copy and return it to us Respectfully Submitted, DAVIS HAMMON & CO. ~L Stephen J. I- - PA ,C RESPONSE: This letter correctly sets forth the understanding of the Mendocino Emergency Services Authority. By: to_s Title: )~`J- Date:' ROY R. SEILER Certified Public Accountant P.O. Box 133 • 231 W. Wood St. Willows, CA 95988 916/934-8841 / 916/934-8849 (Fax) Davis Hammon and Co. December 5, 1997 Certified Public Accountants Review No. 112050 I have reviewed the system of quality control for the accounting and auditing practice of Davis Hammon and Co., in effect for the year ended October 31, 1997. My review was conducted in conformity with standards established by the Peer Review Board of the American Institute of Certified Public Accountants. I tested compliance with the firm's quality control policies and procedures to the extent I considered appropriate. These tests included a review of selected accounting and auditing engagements. In performing my review, I have given consideration to the quality control standards issued by the AICPA. Those standards indicate that a firm's system of quality control should be appropriately comprehensive and suitably designed in relation to the firm's size, organizational structure, operating policies, and the nature of its practice. They state that variance in individual performance can affect the degree of compliance with a firm's quality control system and, therefore, recognize that there may not be adherence to all policies and procedures in every case. In my opinion, the system of quality control for the accounting and auditing practice of Davis Hammon and Co., in effect for the year ended October 31, 1997, met the objectives of quality control standards established by the AICPA and was being complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards in the conduct of that practice. 1/Z, X Z,~g Roy R. Seiler, CPA Member American Institute and California Society of Certified Public Accountants