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MS Word file - Office of the Utah State Auditor

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MS Word file - Office of the Utah State Auditor

    STATE OF UTAH

    UNIFORM ACCOUNTING MANUAL

    Reference: I. D. 07.01

    Page: 1 of 8

    Subject: Sample Contract For Audit Services

    Effective Date: 1 October 1992

    Revision Date: 1 September 1997

    CONTRACT FOR AUDITING SERVICES

    BETWEEN

     [name of city, town, county, or district]

    and

     [name of CPA firm]

    CERTIFIED PUBLIC ACCOUNTANTS

THIS AGREEMENT, entered into as of this day of , 199 , by and

    between [name of entity] , hereinafter referred to as the “CITY,” and the firm of [CPA

    firm] , Certified Public Accountants, hereinafter referred to as the “AUDITOR,” provides for

    audit services for the fiscal year ended June 30, 199 .

WITNESSETH THAT:

    WHEREAS, the CITY is required by law to cause an audit to be made of the accounts of all

    officers of the CITY, and

    WHEREAS, the CITY desires to have performed a financial and compliance audit of the

    CITY for the fiscal year ended June 30, 199 .

    WHEREAS, the CITY has received funds from the Federal Government under grants,

    agreements, and programs which require audits under the guidelines of the Office of Management

    and Budget (OMB) Circular A-133, and

    WHEREAS, in order to meet the requirements of OMB Circular A-133, the CITY desires to

    have performed a single compliance audit of those federal awards for the fiscal year ending June 30,

    199 .

    NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and

    agreements hereinafter set forth, the parties hereto, legally intending to be bound hereby, do

    covenant and agree for themselves and their respective successors and assigns, as follows:

    I. AUDITOR’S DUTIES

    A. Standards: The AUDITOR shall perform all testwork and prepare all reports in

    accordance with the following professional standards and federal audit requirements:

1. Generally accepted auditing standards as promulgated by the American

    Institute of Certified Public Accountants (AICPA), including applicable

    statements of position and audit guides;

    2. Government Auditing Standards issued by the comptroller General of the

    United States;

    3. The Single Audit Act as amended by the Single Audit Act Amendments of 1996;

    4. OMB Circular A-133, Audits of States. Local Governments, and Non-Profit

    Organizations; and

    5. OMB Circular A-133 Compliance Supplement.

    B. Reports: The AUDITOR shall, in accordance with the above standards, prepare the

    following reports:

    1. Report on Financial Statements

    For the fiscal year ended June 30, 199 , the AUDITOR, in accordance with

    generally accepted auditing standards, as promulgated by the AICPA, the AICPA

    Audits of State and Local Governmental Units audit and accounting guide, and

    the Government Auditing Standards, published by the U.S. General Accounting

    Office, shall audit the financial statements and records of the CITY and shall

    issue an AUDITOR’s opinion on the CITY’s financial statements (with an

    in-relation-to opinion on combining and supplementary information). Such

    financial statements shall be prepared in conformity with generally accepted

    accounting principles. Reports on internal control and compliance, as referred

    below, shall also be issued.

    2. Management Report Based on the Audit of the Financial Statements

    The following three sections of this report should be bound together in a single

    document.

    (a) Report on Compliance and on Internal Controls Over Financial Reporting

    Based on an Audit of Financial Statements Performed in Accordance with

    Government Auditing Standards.

    The AUDITOR shall report on their testing of compliance with federal and

    state laws and regulations performed as part of the financial and

    compliance audit. The report must identify occurrences of noncompliance

    with laws and regulations that are material and all instances or indications

    of illegal acts which could result in criminal prosecution. The report must

    contain a statement of positive assurance on items tested.

    The AUDITOR shall report on their understanding of the CITY’s internal

    control over financial reporting and the assessment of control risk made as

    part of the financial and compliance audit. The report shall identify as a

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    minimum: (a) the scope of the AUDITOR’S work in obtaining an

    understanding of the CITY’s internal control over financial reporting and in

    assessing the control risk and (b) the reportable conditions, including the

    identification of material weaknesses, identified as a result of the

    AUDITOR’s work in understanding and assessing the control risk.

(b) Findings and Recommendations

    The AUDITOR shall report findings and recommendations relative to

    compliance with laws and regulations, internal control over financial

    reporting, adherence to generally accepted accounting principles, and

    efficiency of operations. The report shall contain all reportable conditions

    and all instances or indications of illegal acts.

    The AUDITOR shall request written responses and corrective action plans,

    where necessary, from CITY officials for each recommendation and shall

    include such responses in the report.

    (c) Status of Prior Findings and Recommendations

    The AUDITOR shall also report on the CITY’s progress in implementing

    prior audit recommendations.

    3. Single Audit Report

    For the fiscal year ending June 30, 199 , the AUDITOR, in accordance with the standards cited above and the additional standards contained in the Single

    Audit Act as amended by the Single Audit Act Amendments of 1996, OMB

    Circular A-133, and AICPA standards related to compliance auditing, shall issue

    the following reports: (These reports shall be bound together with the CITY’s

    Schedule of Expenditures of Federal Awards and accompanying Notes.)

    (a) Report on Federal Awards: This report covers major program compliance,

    internal controls over federal awards, and the Schedule of Expenditures of

    Federal Awards.

    (1) The AUDITOR shall express an opinion as to whether the CITY

    complied, in all material respects, with the specific requirements

    applicable to major federal financial assistance programs. This

    opinion may be included as part of the Auditor’s Report on Financial

    Statements required by paragraph I. B1.

    (2) The Auditor shall express an opinion as to whether the City complied,

    in all material respects, with the compliance requirements described

    in the U.S. Office of Management and Budget (OMB) Circular A-133

    Compliance Supplement that are applicable to each of its major

    federal programs identified in the summary of auditor’s results

    section of the schedule of findings and questioned costs.

    (3) The report is required to address the AUDITOR’s consideration of the

    internal control policies and procedures over compliance with

    requirements that could have a direct and material effect on major

    federal programs. This report should be prepared in accordance

    I.D.07.01

    Page 4 of 8

    with the criteria set forth in Statement on Auditing Standards (SAS) No. 78, Consideration of the Internal Control in a Financial Statement Audit, SAS No. 60, Communication of Internal Control

    Structure Related Matters Noted in an Audit, and SAS No. 74, Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance.

    (4) The report should comply with SAS No. 29, Reporting on Information Accompanying the Basic Financial Statements in Auditor Submitted

    Documents. The report must reference to the audit having been performed in accordance with standards for financial and compliance

    audits contained in the Governments Auditing Standards, to meet the

    requirements of the OMB Circular A-133.

    (b) Schedule of Findings and Questioned Costs: This report should include

    the following three components as required by OMB Circular A-133:

    (1) A summary of the AUDITOR’s results, including:

    A) The type of report the AUDITOR issued on the financial

    statements;

    B) Where applicable, a statement that reportable conditions in

    internal control were disclosed by the audit of the financial

    statements and whether any such conditions were material

    weaknesses;

    C) A statement as to whether the audit disclosed any

    noncompliance which is material to the financial statements;

    D) Where applicable, a statement that reportable conditions in

    internal control over major programs were disclosed by the

    audit and whether any such conditions were material

    weaknesses;

    E) The type of report the AUDITOR issued on compliance for

    major programs;

    F) A statement as to whether the audit disclosed any audit

    findings which the AUDITOR is required to report in

    accordance with OMB Circular A-133;

    G) An identification of major programs;

    H) The dollar threshold used to distinguish between Type A and

    Type B programs, as described in OMB Circular A-133; and

    I) A statement as to whether the CITY qualified as a low-risk

    auditee.

    (2) Findings relating to the financial statements which are required to be

    reported in accordance with generally accepted government auditing

    standards (GAGAS).

    (3) Findings and questioned costs for federal awards, including, where

    applicable:

    I.D.07.01

    Page 5 of 8

    A) Reportable conditions in internal control over major programs;

    B) Material noncompliance with the provisions of laws,

    regulations, contracts, or grant agreements related to a major

    program;

    C) Known questioned costs which are greater than $10,000, or

    are likely greater than $10,000, for a type of compliance

    requirement for a major program;

    D) Known questioned costs which are greater than $10,000 for a

    Federal program which is not audited as a major program;

    E) The circumstances concerning why the AUDITOR's report on

    compliance for major programs is other than an unqualified

    opinion;

    F) Known fraud affecting a Federal award; and

    G) Instances where the results of audit follow-up procedures

    disclosed that the summary schedule of prior audit findings

    prepared by the CITY materially misrepresents the status of

    any prior audit finding.

    (4) The AUDITOR shall request a written corrective action plan from

    CITY officials for each finding included in the Schedule of Findings

    and Questioned Costs. The corrective action plan shall provide the

    name(s) of the contact person(s) responsible for corrective action,

    the corrective action planned, and the anticipated completion date.

    The corrective action plan shall be bound with the single audit

    reports.

    4. Report on State Legal Compliance

    For the fiscal year ended June 30, 199 , the AUDITOR, in accordance with the State of Utah Legal Compliance Audit Guide, shall issue the following reports bound together in a single document:

    (a) Report on State Legal Compliance

    The AUDITOR shall express an opinion on the CITY’s compliance with the

    state legal requirements identified in the State of Utah Legal Compliance

    Audit Guide.

    (b) The AUDITOR’s Management Letter

    The Management Letter shall identify any reportable conditions in internal

    controls over state legal compliance and all instances of noncompliance

    with state legal issues discovered by the AUDITOR.

    (c) CITY’s Response to the Management Letter

    The AUDITOR shall bind the CITY’s response with the AUDITOR’s

    Management Letter.

    C. Other Services: The AUDITOR shall perform the following services in conjunction

    I.D.07.01

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with preparation of the above reports:

    1. Delivery of Reports

    (a) All reports shall be addressed to the CITY.

    (b) The AUDITOR is to deliver a draft of the Report on the Financial

    Statements to the CITY no later than (date) .

    (c) The AUDITOR is to deliver 5 copies of the final Report on the Financial

    Statements to the CITY no later than (date) .

    (d) The AUDITOR is to deliver 5 copies of the Management Report Based on

    the Audit of the Financial Statements to the CITY no later than (date)

     .

    (e) The AUDITOR is to deliver 5 copies of the Single Audit Report to the CITY

    no later than (date) .

    (f) The AUDITOR is to deliver 5 copies of the Report on State Legal

    Compliance to the CITY no later than (date) .

    (g) The deadlines noted above may be extended by the CITY if, in the opinion

    of the CITY, circumstances existing beyond the control of the AUDITOR

    prevent completion by that date.

    2. Availability of Working Papers

The AUDITOR agrees to make available all working papers, audit programs, and

    time control records associated with the audit of the CITY upon request by the

    CITY during performance of the audit or at the completion of the audit, for a

    quality control review. The AUDITOR also agrees to furnish copies of all

    working papers, audit programs and time control records upon request.

    Working papers and reports shall be retained by the AUDITOR for a minimum of

    three years from the date of the audit report. These same documents will be

    made available to federal and state agencies in accordance with OMB Circular

    A-133 and state law.

    3. Inform CITY of the Following:

    (a) Irregularities

    The AUDITOR shall promptly inform the CITY regarding any indication of

    errors, irregularities or illegal acts that may come to their attention in

    connection with the audit.

    (b) Changes in Personnel

    The AUDITOR agrees to notify the CITY in writing prior to changes of

    partner, manager, supervisor or senior personnel obligated in the

    AUDITOR’s bid proposal.

    II. CITY’S DUTIES

    The CITY shall furnish the following to the AUDITOR:

    A. All financial records, books of accounts, supporting documents, and other related

    I.D.07.01

    Page 7 of 8

    records for and related to the period being audited.

    B. Copies of CITY ordinances, minutes of Council [Board, Commission] meetings, policy

    directives, grant agreements, contracts, leases, budgets, laws, and other pertinent

    documents or data, and such other information as may be required for the audit.

    C. A management representation letter confirming oral representations made to the

    AUDITOR.

    D. Adequate working space and other facilities for the conduct of the audit.

    E. All working papers normally prepared by the CITY in connection with the accounting

    system, all original documents, as requested, evidencing audited transactions.

    F. Assistance of personnel in all reasonable requests from the AUDITOR as the CITY

    staff time and budget will permit, including, but no limited to, the preparation of

    account analyses, summaries, and other working papers requested.

    III. FEE PROVISIONS

    A. It is understood that the not-to-exceed fee, including all out-of-pocket expenses, for

    the services of the AUDITOR, as set forth in Section I. above, shall be $ (fee)

     . The not-to-exceed fee consists of $ for the financial audit services

    and $ for the single audit services. Billings for interim testwork are to be

    submitted to the CITY by June 30, 199 .

    B. The CITY shall have the option to extend this contract to the succeeding ( # )

    fiscal year(s). If the option is exercised for the fiscal year ending June 30, 199

    the not-to-exceed fee, including all out-of-pocket expenses, for the services of the

    AUDITOR will be $ (fee) , consisting of $ for the financial audit services

    and $ for the single audit services.

    C. Separate progress billings to the CITY are allowed for time and expense incurred

    during the audit with the stipulation that progress billings cannot exceed 75% of the

    fees stated above. A statement of the current and cumulative hours incurred shall be

    submitted with each billing. The statement of actual hours incurred must separately

    report hours incurred for services performed in connection with the financial audit and

    hours incurred for services performed in connection with the single audit.

    D. Final payment shall be made upon completion of the audit and upon receipt of the

    AUDITOR’s reports as stipulated in paragraph I.C.1., a final statement of actual hours

    incurred as described in paragraph III.C., and the final billing.

    E. It is expressly understood and agreed that in no event will the amounts to be paid by

    the CITY to the AUDITOR under this contract exceed the fee and conditions made a

    part of this contract.

    F. Payments by the CITY are expressly subject to appropriation therefore, and in the

    absence thereof, this agreement shall be terminated forthwith.

    IV. INDEMNIFICATION

    A. The CITY assumes no liability for any legal expenses, other than for its own defense.

    B. The AUDITOR hereby agrees to indemnify and save harmless the CITY and its

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    officers, agents, and employees, from and against any and all loss, damage, injury,

    liability, and claims thereof, including claims for personal injury or death, howsoever

    caused, resulting directly or indirectly, from the performance of the contract by the

    AUDITOR.

    V. AUDITOR REPRESENTATIONS

    A. The AUDITOR confirms that he is independent of the CITY as defined in the AICPA’s

    Rules of Conduct, Rule 101, and the requirements of the Government Auditing

    Standards, published by the U.S. General Accounting Office.

    B. The AUDITOR confirms that he is properly licensed for public practice as a certified

    public accountant in the State of Utah and that he does not have a record of

    substandard work.

    C. The AUDITOR agrees not to discriminate against any individual because of race,

    color, religion, age, sex, handicap, or national origin, and that these shall not be a

    factor in consideration for employment, selection for training, promotion, transfer,

    recruitment, rates of pay, or other forms of compensation, demotion, or separation.

    D. Said AUDITOR shall be an independent contractor, and as such, shall have no

    authorization, express or implied, to bind the CITY or its agencies, in any agreement,

    settlement, liability, or understanding whatsoever, and shall not perform any acts as

    agent for the CITY except as herein expressly set forth.

    VI. CONTRACT TERMINATION

     This contract may be terminated upon 30 days written notice by either party hereto

    and may be immediately terminated for cause or other bad performance by either

    party.

IN WITNESS THEREOF, the CITY and the AUDITOR have executed this contract as of the date

    first indicated above.

     (Name of CPA firm) CERTIFIED PUBLIC ACCOUNTANTS

     (Partner) Date

     (Name of City)

    (Chairman, City Date Council)

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I.D.07.01

Page

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