AG 2008 04 21 - Laserfiche WebLink

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Mrs, Pam Dubois Cabams County Page 2 December 26, 2007 • .More rigorous assessment of the risks of material misstatement of the financial statements based on that understanding. • Improved linkage between the assessed risks and the nature, timing, and extent of audit procedures performed in response to those risks. In summary, these are the changes you will see as we plan the next audit of your business. Fraud As we pion audit engagements, we will talk with management and others about the risk of fraud in your organization. We will focus on things such as where and how fraud could occur; what communications have been received from employees, former employees, analysts, regulators, or others; what internal procedures are in place to identify specific fraud risks; what programs and controls have been established to mitigate specific fraud risks; what communications to employees have been made regarding business practices and ethic behavior; and what communications with audit committees have been made regarding internal controls that prevent and detect fraud. Engagement letters, management representation letters, internal control letters, -and management comment letters will include references to fraud audit procedures and management responsibilities regarding fraud. Keep in mind our service approach means that we will provide recommendations to you to reduce the risk of potential fraud in your organization, if the opportunity to strengthen such areas exist. Internnl Control Fraud usually occurs because of weaknesses in internal control. Risk assessment should be supported by the auditor's understanding of Ure entity and its environment and internal controls. Auditors are now required to identify significant risks that need special audit consideration. And we are now required- to increase our knowledge of control activities that prevent and detect fraudulent financial reporting. As we plan audit engagements, we will be requesting detailed documentation of your accounting systems. We will be testing those systems for gaps in design and weaknesses in operation AdditlonaUy, we will be reporting on Uie design -and operating effectiveness of internal control and will be making recommendations to management on the structure of internal controls. We will be stressing the importance of management involvement 'in creating controls that inhibit fraud, and fostering an institutional intolerance for fraudulent behavior, including the monitoring of management's override of those controls. Financtal Disclosures At the root of financial reporting is the availability of timely, reliable and meaningflil information The success of our capital. markets depends upon informative, reliable financial reporting -often referred to as "transparency". Tha new auditing staadards emphasize that risks of material misstatement slreuld be considered for disclosures and require Uie audioor to test financial disclosures. Assertions about presentation and disclosure have been expanded to include completeness and understandability to users. As auditors we will focus on the selection and application of accounting policies and whether they are appropriate for the business and ~'~