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Arthur Young ATTACHMENT A Our examination will be conducted in accordance with generally accepted auditing standards. I~ will also take inte consideration the Statutes of North Carolina; rewllations promulgated by the North Carolina Local Government Commission; the publication of the Govenunental Finance Officers Association, "Governmental Accounting, Auditing and Financial Reporting"; National Council on Governmental Accounting Statements and Interpretations; and pronouncements of tho Governmental Accounting Standards Board, Also, in accordance with the Single Audit Act of 1984 and OMB Circular A-128 and the Single Audit Act of North Carolina, we will conduct a single audit, that is, a financial and compliance examination of all state and federal grants and awards. ~he examination shall be performed in accordance with the General Accounting Office Standards for Audit of Governmental Or_~anizatiens. pre,roma. Activities and Functions. the Guidelines for Financial and Compliance Audits of Federally Assisted Pro.rams, compliance supplements approved by OMB, compliance requirements contained in applicable sections of North Catalina general statutes and generally accepted auditing standards established by the American Institute cf Certified Public Accountants. Under generally accepted auditing standards the independent auditor has the responsibility, within the inherent limitations of the auditing process, to plan the examination to search for errors or irregularities (as defined in authoritative professional literature) that would have a material effect on the financial statements. Our search for material errors or irregulariUes ordinarily is accomplished by perfo~ni,~g those auditing procedures that in our judgment are appropriate in the clrc~mstances to form an opinion on the financial statements taken as a whole. Our examination, which is based on the concept of selective testing of the data being examined, is subject to the inherent risk that material errors or irregularities, if they exist, will not be detected, In conducting our ex~mlnation, we will be aware of the responsibility that illegal acts (as defined in authoritative professional literature) may have occurred that may have a material effect on the financial statements. Er~mlnations conducted in accordance with generally accepted auditing standards are of limited effectiveness in discovering possible illegal acts and cannot be expected to provide assurance that illegal acts will bo detected, although procedures that are performed primarily far the purpose of forming an opinion on .the fln.anci,al statements taken as a whole may also bring possible illegal acts to the auditor s attention,