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Compliance and internal control. In the required report on compliance <br />and internal controls, the auditor shall communicate any significant <br />deficiency or material weakness found during the audit. A significant <br />deficiency shall be defined as a control deficiency, or a combination of <br />control deficiencies that adversely affects the entity's ability to initiate <br />authorize, record, process, or report financial data reliably in accordance <br />with generally accepted accounting principles, such that there is more <br />than a remote likelihood that a misstatement of the entity's financial <br />statements that is more than inconsequential will not be prevented or <br />detected. A material weakness shall be defined as a significant deficiency <br />or combination of significant deficiencies, that results in more than a <br />remote likelihood that a material misstatement of the financial statements <br />will not be prevented or detected. Significant deficiencies that are also <br />material weaknesses shall be identified as such in the report. In addition, <br />control deficiencies discovered by the auditors that are neither significant <br />deficiencies nor material weaknesses shall be reported in a separate letter <br />to management which shall be referred to in the report on compliance and <br />internal controls. A control deficiency shall be deemed to have occurred <br />whenever the design or operation of a control does not allow management <br />or employees, in the normal course of perForming their assigned functions, <br />to prevent or detect misstatements on a timely basis. The reports on <br />compliance and internal controls shall include all instances of <br />noncompliance. Auditors shall be required to make an immediate, written <br />report of all irregularities and illegal acts or indications of illegal acts of <br />which they become aware to the Director of Finance. <br />Reporting to the Fiscal Affairs Committee. The auditors shall assure <br />themselves that the City's Fiscal Affairs Committee is informed of each of <br />the following: <br />1. The auditor's responsibility under generally accepted auditing <br />standards <br />2. Significant accounting policies <br />3. Management judgments and accounting estimates <br />4. Significant audit adjustments <br />5. Auditor's judgments about the quality of the entity's accounting <br />principles <br />6. Other information in documents containing audited financial <br />statements <br />7. Disagreements with management <br />8. Management consultation with other accountants <br />9. Major issues discussed with management prior to retention <br />10. Difficulties encountered in perForming the audit <br />14 <br />