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ATTACHMENT A Pàge 20f 8 of the Governmental Finance Officers Association, "Governmental Accounting, Auditing and Financial Reporting"; National Council on Governmental Accounting Statements and Interpretations; and pronoUncements of the Governmental Accounting Standards Board. Also, in accordance with the Single Audit Ac t of 1984 and OMB Circular A-128, we will condUct a single audit, that is, a financial and compliance examination of state and federal grants and awards. The examination shall be performed in accordance with the General Accounting Office Standards for Audit of Governmental Organizations, Programs, Acfiv~ t~es and Functions, the Guidelines for Financial and Compliance Audits of Federally Assisted Programs, compliance supplements approved by OMß, . corn- pliance requirements contained in applicable sections of North Carolina general statutes and generally accepted auditing standards established by the American Institute of Certified Public Accountants. Under generally accepted auditing standards the independent audi tor has the responsibility, wi thi n the inherent limitations of the auditing process, to plan the examination to search for errors or irregularities (as defined in authori ta tive profes- sional literature) that would have a material effect on the financial statements. Our search for material errors or irregu- lari ties ordinarily is accomplished by performing those auditing procedures that in our judgment are appropriate in the circum- stances to form an opinion on the financial statements as a whole. Our examination, which is based on the concept of selec- tive 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 examination, we will be aware of the responsi- bility that illegal acts (as defined in authoritative profes- sional literature) may have occurred that may have a material effect on the financial statements. Examinations conducted in accordance with generally accepted auditing standards are of limited effectiveness in discovering possible illegal acts and cannot be expected to provide assurance ~hat illegal acts will be detected, although procedures that are performed primari ly for the purpose of forming an opinion on the financial statements as a whole may also bring possible illegal acts to the auditor's attention, (p