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Mr. Francisco Gutierrez <br /> <br /> ` Executive Director of Finance and Management <br /> City of Santa Ana <br /> - January 26, 2010 <br /> Page 4 <br /> Because an audit is designed to provide reasonable, but not absolute assurance and because we will not <br /> perform a detailed examination of all transactions, there is a risk that material misstatements or <br /> noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial <br /> misstatements or violations of laws or governmental regulations that do not have a direct and material effect <br /> on the financial statements or major programs. However, we will inform you of any material errors and any <br /> fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform <br /> you of any violations of laws or governmental regulations that come to our attention, unless clearly <br /> inconsequential. We will include such matters in the reports required for a Single Audit. Our responsibility as <br /> auditors are limited to the period covered by our audit and does not extend to any later periods for which we <br /> are not engaged as auditors. <br /> Our procedures will include tests of documentary evidence supporting the transactions recorded in the <br /> accounts, and may include tests of the physical existence of inventories, and direct confirmation of <br /> receivables and certain other assets and liabilities by correspondence with selected individuals, funding <br /> sources, creditors, and financial institutions. We will request written representations from your attorneys as <br /> part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audits, <br /> we will require certain written representations from you about the financial statements and related matters. <br /> Audit Procedures-Internal Controls <br /> Our audits will include obtaining an understanding of the entity and its environment, including internal <br /> control, sufficient to assess the risks of material misstatement of the financial statements and to design the <br /> nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the <br /> effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that <br /> are material to the financial statements and to preventing and detecting misstatements resulting from illegal <br /> acts and other noncompliance matters that have a direct and material effect on the financial statements. Our <br /> tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, <br /> accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government <br /> Auditing Standards. <br /> As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the <br /> effectiveness of the design and operation of controls that we consider relevant to preventing or detecting <br /> material noncompliance with compliance requirements applicable to each major federal award program. <br /> However, our tests will be less in scope than would be necessary to render an opinion on those controls and, <br /> accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular <br /> A-133. <br /> An audit is not designed to provide assurance on internal control or to identify significant deficiencies. <br /> However, during the audit, we will communicate to management and those charged with governance internal <br /> control related matters that are required to be communicated under AICPA professional standards, <br /> Government Auditing Standards, and OMB Circular A-133. <br /> 251-9 <br /> <br />