DRAFT AUDITOR S RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA

Transcription

1 Finance and Audit Cmmittee Kentucky Cmmunity and Technical Cllege System Fundatin, Inc. Versailles, Kentucky Prfessinal standards require that we cmmunicate certain matters t keep yu adequately infrmed abut matters related t the financial statement audit that are, in ur prfessinal judgment, significant and relevant t yur respnsibilities in verseeing the financial reprting prcess. We cmmunicate such matters in this reprt. AUDITOR S RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA Our respnsibility is t frm and express an pinin abut whether the financial statements that have been prepared by management with yur versight are presented fairly, in all material respects, in cnfrmity with accunting principles generally accepted in the United States f America. The audit f the financial statements des nt relieve yu f yur respnsibilities and des nt relieve management f their respnsibilities. Refer t ur engagement letter with the Kentucky Cmmunity and Technical Cllege System Fundatin, Inc. ( Fundatin ) fr further infrmatin n the respnsibilities f management and f Crwe Hrwath LLP. PLANNED SCOPE AND TIMING OF THE AUDIT We are t cmmunicate an verview f the planned scpe and timing f the audit. Accrdingly, the fllwing matters regarding the planned scpe and timing f the audit were discussed with yu n August 4, Hw we prpsed t address the significant risks f material misstatement, whether due t fraud r errr. Our apprach t internal cntrl relevant t the audit. The cncept f materiality in planning and executing the audit, fcusing n the factrs cnsidered rather than n specific threshlds r amunts. Yur views and knwledge f matters yu cnsider warrant ur attentin during the audit, as well as yur views n: The allcatin f respnsibilities between yu and management. The entity's bjectives and strategies, and the related business risks that may result in material misstatements. Significant cmmunicatins with regulatrs. Other matters yu believe are relevant t the audit f the financial statements. 1.

2 SIGNIFICANT ACCOUNTING POLICIES AND MANAGEMENT JUDGMENTS AND ACCOUNTING ESTIMATES Significant Accunting Plicies: The Finance and Audit Cmmittee shuld be infrmed f the initial selectin f and changes in significant accunting plicies r their applicatin. Als, the Finance and Audit Cmmittee shuld be aware f methds used t accunt fr significant unusual transactins and the effect f significant accunting plicies in cntrversial r emerging areas where there is a lack f authritative cnsensus. We believe management has the primary respnsibility t infrm the Finance and Audit Cmmittee abut such matters. There were n such accunting changes r significant plicies requiring cmmunicatin. Management Judgments And Accunting Estimates: Further, accunting estimates are an integral part f the financial statements prepared by management and are based upn management s current judgments. These judgments are based upn knwledge and experience abut past and current events and assumptins abut future events. Certain estimates are particularly sensitive because f their significance and because f the pssibility that future events affecting them may differ markedly frm management s current judgments and may be subject t significant change in the near term. The fllwing describes the significant accunting estimates reflected in the Fundatin s year-end financial statements, the prcess used by management in frmulating these particularly sensitive accunting estimates and the primary basis fr ur cnclusins regarding the reasnableness f thse estimates. Significant Accunting Estimate Allwance fr Dubtful Accunts and Bad Debt Expense Fair Values f Investment Securities and Other Financial Instruments Useful Lives f Fixed Assets Prcess Used by Management The allwance fr dubtful accunts was determined by management by a prcess invlving cnsideratin f past experiences, current aging infrmatin, infrmatin frm credit reprts, cntacts with the custmers, and ther available data including envirnmental factrs such as industry, gegraphical, ecnmic and plitical factrs. The disclsure f fair values f securities and ther financial instruments requires management t use certain assumptins and estimates pertaining t the fair values f its financial assets and financial liabilities. Management has determined the ecnmic useful lives f fixed assets based n past histry f similar types f assets, future plans as t their use, and ther factrs that impact their ecnmic value t the Fundatin. Basis fr Our Cnclusins We tested this accunting estimate by reviewing, n a test basis, the infrmatin listed and by testing infrmatin in certain custmers credit files. We tested the prpriety f infrmatin underlying management s estimates. We tested the prpriety f infrmatin underlying management s estimates. 2.

3 AUDITOR S JUDGMENTS ABOUT QUALITATIVE ASPECTS OF SIGNIFICANT ACCOUNTING PRACTICES We are t discuss with yu ur cmments abut the fllwing matters related t the Fundatin s accunting plicies and financial statement disclsures. Accrdingly, these matters will be discussed during ur meeting with yu. The apprpriateness f the accunting plicies t the particular circumstances f the entity, cnsidering the need t balance the cst f prviding infrmatin with the likely benefit t users f the entity's financial statements. The verall neutrality, cnsistency, and clarity f the disclsures in the financial statements. The effect f the timing f transactins in relatin t the perid in which they are recrded. The ptential effect n the financial statements f significant risks and expsures, and uncertainties that are disclsed in the financial statements. The extent t which the financial statements are affected by unusual transactins including nnrecurring amunts recgnized during the perid, and the extent t which such transactins are separately disclsed in the financial statements. The issues invlved, and related judgments made, in frmulating particularly sensitive financial statement disclsures. The factrs affecting asset and liability carrying values, including the entity's basis fr determining useful lives assigned t tangible and intangible assets. The selective crrectin f misstatements, fr example, crrecting misstatements with the effect f increasing reprted earnings, but nt thse that have the effect f decreasing reprted earnings. CORRECTED AND UNCORRECTED MISSTATEMENTS Crrected Misstatements: We are t infrm yu f material crrected misstatements that were brught t the attentin f management as a result f ur audit prcedures. There were n such misstatements Uncrrected Misstatements: We are t infrm yu f uncrrected misstatements that were aggregated by us during the current engagement and pertaining t the latest and prir perid(s) presented that were determined by management t be immaterial, bth individually and in the aggregate, t the financial statements taken as a whle. Fr yur cnsideratin, we have distinguished misstatements between knwn misstatements and likely misstatements. A prir year adjustment was waived by management fr a reclassificatin f net assets recrded in the current year. The effect f the entry is an increase t unrestricted net assets and a decrease in temprarily restricted net assets fr fiscal year 2015 by $10,585. There is n impact n the change in net assets fr 2015 (knwn misstatement) 3.

4 OTHER COMMUNICATIONS Cmmunicatin Item Other Infrmatin In Dcuments Cntaining Audited Financial Statements Infrmatin may be prepared by management that accmpanies the financial statements. T assist yur cnsideratin f this infrmatin, yu shuld knw that we are required by audit standards t read such infrmatin and cnsider whether such infrmatin, r the manner f its presentatin, is materially incnsistent with infrmatin in the financial statements. If we cnsider the infrmatin materially incnsistent based n this reading, we are t seek a reslutin f the matter. Significant Difficulties Encuntered During the Audit We are t infrm yu f any significant difficulties encuntered in dealing with management related t the perfrmance f the audit. Disagreements With Management We are t discuss with yu any disagreements with management, whether r nt satisfactrily reslved, abut matters that individually r in the aggregate culd be significant t the Fundatin s financial statements r the auditr s reprt. Results We understand that management has nt prepared such infrmatin t accmpany the audited financial statements. There were n significant difficulties encuntered in dealing with management related t the perfrmance f the audit. During ur audit, there were n such disagreements with management. Cnsultatins With Other Accuntants If management cnsulted with ther accuntants abut auditing and accunting matters, we are t infrm yu f such cnsultatin, if we are aware f it, and prvide ur views n the significant matters that were the subject f such cnsultatin. Representatins The Auditr Is Requesting Frm Management We are t prvide yu with a cpy f management s requested written representatins t us. Significant Issues Discussed, r Subject t Crrespndence, With Management We are t cmmunicate t yu any significant issues that were discussed r were the subject f crrespndence with management. Significant Related Party Findings and Issues We are t cmmunicate t yu significant findings and issues arising during the audit in cnnectin with the Fundatin s related parties. Other Findings r Issues We Find Relevant r Significant We are t cmmunicate t yu ther findings r issues, if any, arising frm the audit that are, in ur prfessinal judgment, significant and relevant t yu regarding yur versight f the financial reprting prcess. We are nt aware f any instances where management cnsulted with ther accuntants abut auditing r accunting matters since n ther accuntants cntacted us, which they are required t d by Statement n Auditing Standards N. 50, befre they prvide written r ral advice. We direct yur attentin t a cpy f the letter f management s representatin t us prvided separately. There were n such significant issues discussed, r subject t crrespndence, with management. There were n such findings r issues that are, in ur judgment, significant and relevant t yu regarding yur versight f the financial reprting prcess. There were n such ther findings r issues that are, in ur judgment, significant and relevant t yu regarding yur versight f the financial reprting prcess. 4.

5 We are pleased t serve yur Fundatin as its independent auditrs and lk frward t ur cntinued relatinship. We prvide the abve infrmatin t assist yu in perfrming yur versight respnsibilities, and wuld be pleased t discuss this letter r any matters further, shuld yu desire. This letter is intended slely fr the infrmatin and use f the Finance and Audit Cmmittee and, if apprpriate, management, and is nt intended t be and shuld nt be used by anyne ther than these specified parties. Lexingtn, Kentucky <Date> Crwe Hrwath LLP 5.