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<br /> <br />Review Draft 6/18/2013 5:11:57 PM <br /> <br />Retention Issues: We did not discuss any major issues with management regarding the <br />application of accounting principles and auditing standards that resulted in a condition to our <br />retention as the City’s auditors. <br /> <br />Difficulties: We encountered no serious difficulties in dealing with management relating to the <br />performance of the audit. <br /> <br />As discussed in Note 18 to the financial statements, the State enacted ABx1 26 and AB1484 <br />(Dissolution Laws) which dissolved California redevelopment agencies effective January 31, <br />2012. The provisions of the Dissolution Laws are extremely complex and contain provisions <br />requiring the unwinding of transactions recorded in prior years and remeasurement of amounts <br />due to the City and its component units. The Dissolution Laws also give the State Controller’s <br />Office and Department of Finance approval powers over transactions and asset transfers and <br />require a plethora of filings, processes and special procedures to be performed by external audit <br />firms. These matters required an exorbitant amount of staff’s time and attention. This in turn had <br />an adverse effect on audit timing and effort. <br /> <br />Audit Adjustments: For purposes of this communication, professional standards define an audit <br />adjustment, whether or not recorded by the City, as a proposed correction of the financial <br />statements that, in our judgment, may not have been detected except through the audit procedures <br />performed. These adjustments may include those proposed by us, but not recorded by the City, <br />that could potentially cause future financial statements to be materially misstated, even though we <br />have concluded that the adjustments are not material to the current financial statements. <br /> <br />We did not propose any audit adjustments that, in our judgment, could have a significant effect, <br />either individually or in the aggregate, on the City’s financial reporting process. <br /> <br />Uncorrected Misstatements: Professional standards require us to accumulate all known and <br />likely misstatements identified during the audit, other than those that are trivial, and communicate <br />them to the appropriate level of management. We have no such misstatements to report to the <br />City Council. <br /> <br />****** <br /> <br />This report is intended solely for the information and use of the City Council, its committees, and <br />management and is not intended to be and should not be used by anyone other than these <br />specified parties. <br /> <br /> <br /> <br /> <br />