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
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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:
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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
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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
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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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