Office of the State Auditor
Dianne E. Ray, CPA
State Auditor
DATE
CONFIDENTIAL
NAME OF GOVERNMENT UNIT OFFICIAL
TITLE OF GOVERNMENT UNIT OFFICIAL
NAME OF GOVERNMENT UNIT
ADDRESS1
ADDRESS2
Dear Executive Director or Director’s Name:
We are pleased to confirm our understanding of the services we are to provide to the State of Colorado, NAME
OF GOVERNMENT UNIT (the “XXXXXX”)for the year ended June 30, 2014. We will soon begin our annual
audit of the NAME OF GOVERNMENT UNIT’s accounting records and other related financial information
(financial information) of its governmental activities, business-type activities, and each major fund, as
applicable to the NAME OF GOVERNMENT UNIT, as of and for the year ended June 30, 2014. This financial
information and the aggregate remaining fund information, along with other financial information for the NAME
OF GOVERNMENT UNIT, collectively comprise the State of Colorado’s basic financial statements. Our audit
will include a review of transactions processed by the NAME OF GOVERNMENT UNIT. We will be
contracting with (NAME OF AUDIT FIRM OR OMIT THIS LAST SENTENCE, IF IN-HOUSE) to complete
the audit.
Audit Objectives
The objective of our audit is to obtain reasonable assurance about whether the State of Colorado’s basic financial
statements, are fairly presented in all material respects, in conformity with U.S. generally accepted accounting
principles and to report on the fairness of supplementary information when considered in relation to the financial
statements as a whole. The objectives also include:

A report (that does not include an opinion) on the State of Colorado’s internal control related to the
financial statements and compliance with laws, regulations, and the provisions of contract agreements,
noncompliance with which could have a material effect on the financial statements as required by
Government Auditing Standards.

Findings and recommendations for improvement in the NAME OF GOVERNMENT UNIT’s financial
accounting practices and internal control.

Evaluating the progress in implementing prior recommendations.

Reviewing exhibits required by the Office of the State Controller to be submitted in support of the
statewide financial statements, including reconciliation to the Colorado Financial Reporting System
(COFRS). Also, verifying that all adjusting journal entries made by the NAME OF GOVERNMENT
We Set the Standard for Good Government
State Services Building • 1525 Sherman Street, 7th Floor • Denver, Colorado 80203-1700
Phone: 303.869.2800
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UNIT after the final year-end closing of the COFRS have been approved in accordance with fiscal
policy.

Preparation of report comments and/or a management letter, as appropriate based on assessed severity
level, containing audit findings and recommendations for improvements in the operations, internal
controls, and accounting procedures of the Name of Government unit, along with any opportunities for
cost savings determined through the audit.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States of
America (GAAS) and the standards for financial audits contained in the Government Auditing Standards, issued
by the Comptroller General of the United States, (ADD IF APPLICABLE - ; the Single Audit Act Amendments
of 1996; and the provisions of OMB Circular A-133.) Those standards require that we plan and perform the
audit to obtain reasonable assurance rather than absolute assurance about whether the financial statements are
free from material misstatement of the financial statements, whether due to fraud or error. An audit involves
performing procedures to obtain audit evidence about the amounts and disclosures in the State’s financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements. In
addition, an audit includes tests of the accounting records of the NAME OF GOVERNMENT UNIT (ADD IF
APPLICABLE- a determination of major program(s) in accordance with OMB Circular A-133,) and other
procedures we consider necessary to enable us to express opinions on the State of Colorado’s basic financial
statements and schedules.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an
unavoidable risk exists that some material misstatements may not be detected, even though the audit is properly
planned and performed in accordance with GAAS and Government Auditing Standards.
In making our risk assessments, we consider internal control relevant to the entity’s preparation and fair
presentation of the financial information in order to design audit procedures that are appropriate in the
circumstances. An audit is not designed to provide assurance on internal control or to identify significant
deficiencies or material weaknesses; therefore, we will not express an opinion on the effectiveness of the entity’s
internal control. However, we will communicate to you and the Legislative Audit Committee, in writing,
concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the
NAME OF GOVERNMENT UNIT’s financial information that we have identified during the audit which are
required to be communicated under standards established by the American Institute of Certified Public
Accountants and Government Auditing Standards (ADD IF APPLICABLE – and OMB Circular A-133). We
will also inform management of any control deficiencies or other matters involving internal control that we deem
necessary.
Management Responsibilities
Our audit will be conducted on the basis that management acknowledges and understands that it has
responsibility for adopting sound accounting policies, in connection with the preparation and fair presentation of
its financial information in accordance with accounting principles generally accepted in the United States of
America. Management acknowledges and understands that it has responsibility for the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of its financial information
that are free from material misstatement, whether due to fraud or error. (ADD IF APPLICABLE - Management
acknowledges and understands that it has responsibility for the design, implementation, and maintenance of
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internal control relevant to major programs and compliance with laws, regulations, and the provisions of
contracts or grant agreements that could have a direct and material effect on each major program in accordance
with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments,
and Non-Profit Organizations. Management is also responsible for identifying government award programs and
understanding and complying with the compliance requirements, and for preparation of the related financial
schedules used for the preparation of the schedule of expenditures of federal awards, in accordance with the
requirements of OMB Circular A-133.) In addition, management acknowledges and understands that it is
responsible for its financial information that comprises its’ portion of the State’s basic financial statements and
all accompanying information, as well as, all representations contained therein. Management is responsible for
making all management decisions and performing all management functions relating to its financial information
and for accepting full responsibility for such decisions. Management will also be required to acknowledge in the
written management representation letter that it is responsible for review and approval of adjusting journal
entries and that those entries were made to the NAME OF GOVERNMENT UNIT’s financial records.
Management acknowledges and understands that it is responsible for establishing and maintaining effective
internal control and for compliance with the provisions of contracts, agreements, and grant agreements, including
monitoring ongoing activities, to help ensure that appropriate goals and objectives are met. The objectives of
internal control are to provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with
management’s authorizations and recorded properly to permit the preparation of the State’s financial statements
in accordance with U.S. generally accepted accounting principles, and that programs are managed in compliance
with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also
responsible for the selection and application of accounting principles, and for the fair presentation in its financial
information of the respective financial position of the governmental activities, business-type activities, each
major fund, and the aggregate remaining fund information, of the NAME OF GOVERNMENT UNIT and the
respective changes in financial position and, where applicable, cash flows in conformity with U.S. generally
accepted accounting principles. In fulfilling these responsibilities, estimates and judgments by management are
required to assess the expected benefits and related costs of the controls.
Management acknowledges and understands that it is responsible for providing us with (1) access to all
information of which management is aware that is relevant to the preparation and presentation of the financial
statements and that the financial information is reliable and properly recorded, (2) additional information that we
may request for the purpose of the audit, and (3) unrestricted access to persons within the NAME OF
GOVERNMENT UNIT from whom we determine it necessary to obtain audit evidence. Management
acknowledges and understands that it is responsible for the accuracy and completeness of all financial
information. Management agrees to inform us of events occurring or facts discovered subsequent to the date of
the opinion on the State’s financial statements, of which management may become aware, that may affect the
financial statements.
Management responsibilities include identifying significant vendor relationships in which the vendor has
responsibility for program compliance and for the accuracy and completeness of that information. Management
responsibilities also include adjusting the NAME OF GOVERNMENT UNIT’s financial information to correct
material misstatements and for confirming to us in the written representation letter that the effects of any
uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period
presented are immaterial, both individually and in the aggregate, to the State’s financial statements taken as a
whole. Material misstatements should be communicated to both us and the Office of the State Controller on the
Exhibit H.
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Management is responsible for the design and implementation of programs and internal controls to prevent and
detect fraud, and for informing us about all known or suspected fraud affecting the NAME OF GOVERNMENT
UNIT involving (1) management, (2) employees who have significant roles in internal control, and (3) others
where the fraud or illegal acts could have a material effect on the financial statements. Management is also
responsible for informing us if management has knowledge of any allegations of fraud or suspected fraud
affecting the NAME OF GOVERNMENT UNIT received in communications from employees, former
employees, grantors, regulators, or others. In addition, management is also responsible for identifying and
ensuring the NAME OF GOVERNMENT UNIT complies with applicable laws, regulations, contracts,
agreements, and grants.
Management is responsible for establishing and maintaining a process for tracking the status of audit findings
and recommendations (ADD IF APPLICABLE , including those related to OMB Circular A-133).
Management is also responsible for identifying previous financial audits, attestation engagements, performance
audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. The
responsibility includes communicating to us, corrective actions taken to address significant findings and
recommendations resulting from those audits, attestation engagements, performance audits, or other studies.
Management is responsible for providing management’s views on our current findings, conclusions, and
recommendations, as well as your planned corrective actions, for the report, and for the timing and format for
providing that information (ADD IF APPLICABLE - , including those related to OMB Circular A-133).
Audit Procedures - General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the NAME OF
GOVERNMENT UNIT’s accounting records and other related financial information; therefore, our audit will
involve judgment about the number of transactions to be examined and the areas to be tested. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as, evaluating the overall presentation of the State’s financial
statements. We will plan and perform the audit to obtain reasonable rather than absolute assurance about
whether the NAME OF GOVERNMENT UNIT’s accounting records and other related financial information are
free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of
assets, or (4) violations of laws or governmental regulations that are attributable to the NAME OF
GOVERNMENT UNIT or to acts by management or employees acting on behalf of the NAME OF
GOVERNMENT UNIT. Because the determination of abuse is subjective, Government Auditing Standards do
not expect auditors to provide reasonable assurance of detecting abuse.
Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and
because we will not perform a detailed examination of all transactions, there is a risk that material misstatements
or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed
in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition,
an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that
do not have a direct and material effect on the NAME OF GOVERNMENT UNIT's financial information or to
major programs, if applicable. However, we will inform the appropriate level of management and/or the
Legislative Audit Committee of any material errors and any fraudulent financial reporting or misappropriation of
assets that comes to our attention. We will also inform the appropriate level of management of any violations of
laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material
abuse that comes to our attention. We will include such matters in the reports required for a Single Audit. Our
responsibility, as auditors, is limited to the period covered by our audit and does not extend to matters that might
arise during any later periods.
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Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts,
and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain
other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial
institutions. We will request written representations from the NAME OF GOVERNMENT UNIT's attorneys as
part of our engagement. At the conclusion of our audit, we will also require certain written representations from
management about the NAME OF GOVERNMENT UNIT’s accounting records and other related financial
information and related matters.
Audit Procedures - Internal Controls
Our audit will include obtaining an understanding of the NAME OF GOVERNMENT UNIT and its
environment, including internal control, sufficient to assess the risks of material misstatement of the financial
statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be
performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors
and fraud that are material to the NAME OF GOVERNMENT UNIT’s accounting records and other related
financial information, and to preventing and detecting misstatements resulting from illegal acts and other
noncompliance matters that have a direct and material effect on the NAME OF GOVERNMENT UNIT’s
financial information. Our tests, if performed, will be less in scope than would be necessary to render an opinion
on internal control and, accordingly, no opinion will be expressed in our report on internal control issued
pursuant to Government Auditing Standards.
(ADD IF APPLICABLE - As required by OMB Circular A-133, we will perform tests of controls over
compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to
preventing or detecting material noncompliance with compliance requirements applicable to each major federal
award program. However, our tests will be less in scope than would be necessary to render an opinion on those
controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to
Government Auditing Standards.)
Audit Procedures - Compliance
As part of obtaining reasonable assurance about whether the NAME OF GOVERNMENT UNIT’s financial
information is free of material misstatement, we will perform tests of the NAME OF GOVERNMENT UNIT’s
compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. However, the
objective of our audit will not be to provide an opinion on overall compliance and we will not express such an
opinion in our report on compliance issued pursuant to Government Auditing Standards.
Reporting
We will issue a written report upon completion of our audit of the State of Colorado’s financial statements. Our
report will be addressed to the Legislative Audit Committee. We cannot provide assurance that an unmodified
opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an
emphasis-of-matter or other-matter paragraph(s), or withdraw from the engagement. We also will issue a written
report (that does not include an opinion) on internal control related to the financial statements and compliance
with laws, regulations, and the provisions of contract agreements, noncompliance with which could have a
material effect on the financial statements as required by Government Auditing Standards. (ADD IF
APPLICABLE - We will also issue a written report with an opinion on compliance with requirements that could
have a direct and material effect on each major program and internal control over compliance in accordance with
OMB Circular A-133.) As part of the financial statement report, we will provide findings and recommendations
for improvement in the State’s financial accounting practices and internal control, and will evaluate the progress
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in implementing prior recommendations. The report on internal control and compliance will include a statement
that the report is intended solely for the information and use of management, the Legislative Audit Committee,
others within the entity, and is not intended to be and should not be used by anyone other than these specified
parties. If our opinions on the financial statements or the Single Audit Act compliance opinions are other than
unqualified (unmodified), we will discuss the reasons with you in advance. If, for any reason, we are unable to
complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to
issue a report as a result of this engagement. If during our audit we become aware the NAME OF
GOVERNMENT UNIT is subject to an audit requirement that is not encompassed in the terms of this
engagement, we will communicate to management and those charged with governance that an audit in
accordance with U.S. generally accepted auditing standards and the standards for financial audits contained in
Government Auditing Standards may not satisfy the relevant legal, regulatory, or contractual requirements.
Audit Administration, Fees, and Other
In order to complete our audit of the NAME OF GOVERNMENT UNIT’s accounting records and other related
financial information, as they collectively comprise the State’s basic financial statements, we request that the
NAME OF GOVERNMENT UNIT's employees prepare or perform the following:
1. Locate any documents selected by us for testing.
2. Prepare schedules and analysis of certain requested financial information.
3. Provide access to and/or obtain electronic data processing files.
4. Assist our auditing staff as may be required.
5. Provide work space, telephone and internet access for auditors; work space should be reasonably
close to the NAME OF GOVERNMENT UNIT's accounting staff.
The audit documentation for this engagement is the property of the Office of the State Auditor and constitutes
confidential information. However, pursuant to authority given by law or regulation, we may be requested to
make certain audit documentation available to federal agencies providing direct or indirect funding for purposes
of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities; an
independent audit organization to conduct an external peer review; or the U.S. Government Accountability
Office to coordinate audit efforts and coverage. If requested, access to such documentation will be provided
under the supervision of the Office of the State Auditor personnel. Furthermore, we may provide copies of
selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute
copies or information contained therein to others, including other governmental agencies. In all cases, the
documentation will remain confidential.
The audit may require access to sensitive or confidential information. Section 2-3-107(2), C.R.S., grants the
State Auditor “access at all times…to all of the books, accounts, reports, vouchers, or other records or
information in any department, institution, or agency, including but not limited to records or information
required to be kept confidential or exempt from public disclosure upon subpoena, search warrant, discovery
proceedings, or otherwise.” The OSA has developed procedures to protect sensitive or confidential information
obtained during the audit. We ask that management identify to the audit team any documents or databases
related to the audit that are protected from public disclosure by law or are otherwise considered to be confidential
or sensitive in nature. Please also provide the legal citation, if applicable, protecting any databases or
information we request during the audit. The audit documentation for this engagement will be retained for a
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minimum of five years after the report release date or for any additional period requested by a federal agency. If
we are aware that a federal awarding agency or auditee is contesting an audit finding, we will contact the parties
contesting the audit finding for guidance prior to destroying the audit documentation.
This letter shall serve as authorization for the use of e-mail and other electronic methods to transmit and receive
information, including confidential information, but excluding protected information, between the NAME OF
GOVERNMENT UNIT, and us, and between outside specialists or other entities engaged by the NAME OF
GOVERNMENT UNIT and us. The NAME OF GOVERNMENT UNIT acknowledges that e-mail travels over
the public Internet, which is not a secure means of communication and, thus, confidentiality of the transmitted
information could be compromised. We will employ commercially reasonable efforts and take appropriate
precautions to protect the privacy and confidentiality of transmitted information.
An exit conference will be held with management. No audit findings will be released without having an exit
conference (or mutual agreement to not have an exit conference) and requesting management’s written responses
to the recommendations.
The audit work will begin on DATE and the final State’s audit report will be completed by February 2015. We
anticipate that we will date the audit opinions by December 2014. When completed, the NAME OF
GOVERNMENT UNIT’s portion of the State’s audit report, if applicable, will be delivered to you in pre-release
form. However, this draft report cannot be distributed or discussed with the public until released by the
Legislative Audit Committee. Completion of the audit within the above time frame is contingent upon timely
completion of audit schedules, including the audit of the State’s basic financial statements, on the whole, and the
cooperation and assistance rendered by the NAME OF GOVERNMENT UNIT's staff.
It is recognized that staff auditors need to maintain audit independence during the term of the audit; therefore,
please refrain from discussing employment opportunities with auditors while the audit is in process.
The following are the audit assignments for the (NAME OF GOVERNMENT UNIT):
Dianne Ray, State Auditor
Kerri Hunter, Deputy State Auditor
Name, Title, Contract Monitor
NAME OF CONTACT PERSON, TITLE, NAME OF CONTRACT FIRM, IF APPLICABLE
We will bill for reimbursement of audit work performed related to non-general fund activities. The estimated
amount to be billed is not expected to exceed $XXXXX, and will be billed during the fiscal years ending
(DELETE – “s”, if applicable) ending June 30, 2014 and (DELETE IF APPLICABLE - “ending June 30, 2014
and”) June 30, 2015. We will inform management if there are any significant changes in our estimate.
Government Auditing Standards require that we provide management with a copy of our most recent external
peer review report and any subsequent peer review reports received during the period of our engagement. Our
2012 peer review report accompanies this letter.
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We appreciate the opportunity to be of service to the NAME OF GOVERNMENT UNIT and believe this letter
accurately summarizes the significant terms of our engagement. If management has any questions, please let us
know. Please sign and return the original copy of this letter to indicate your acknowledgement of, and agreement
with, the arrangements for our audit of the financial statements including our respective responsibilities.
Very truly yours,
Kerri Hunter, CPA
Deputy State Auditor
RESPONSE:
Acknowledged and agreed on behalf of the NAME OF GOVERNMENT UNIT by
________________________
NAME OF GOVERNMENTAL UNIT HEAD, TITLE
________________________
XXXX, Controller