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City of Arden HittllS March 24, 20 Page Tw As part of obtaining reasonable assurance about whether the [mancial statements are free of material misstatement, we performed tests of compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. We noted one instance of non-co e "With Mirmesota statutes noted below: Management has the responsibility for selection and use of appropriate acco engagement letter, we will advise management about the appropriateness of ac significant accounting policies used by the City are d ed in Note I to the fi were adopted and the application of existing policies nged during 2004. City during the year that were both significant and unusu . 'ch, under profess you, or transactions for which there is a lack of authoritati sensus, Collateral Coverage In accordance with Minnesota statute, section 118A.03, the City is required t the deposits not covered with insurance. The City had adequate collater December 31, 2004, the City did not have any collateral pledged. discovery. teral equal to I 10 percent of r 30, 2004, but at ituation upon Significant Accounting Policies ies_ ""In accordance with the temIS of our policies and their application. The tatements_ No new accounting policies ted no transactions entered into by the aIds, we 3re required to inform Accounting Estimates . Accounting estimates are an inte knowledge and experience a particularly sensitive beca affecting them may differ ;igni capital asset basis and depreciatio repared by agement and are based on management's . ons about future events. Certain accounting estimates are Is and because of the possibility that future events 'ficant estimate affecting the fmanciaJ statements were d on es d historical cost and the estimate of depreciation is based on the ed the key factors and assumptions used to develop these accounting estimates ancial statements taken as a whole, For pnrposes oft dards define an audit adjustment as a proposed correction of the combined [mancial statements that, in 0 ave been detected except through our auditing procedures. An audit adjustment mayor may not indicate matt a significant effect on the City's [mancial reporting process (that is, cause future fmancial statements to be materiall n our judgment, none of the adjustments we proposed, whether recorded or unrecorded by the City, either individually 0 .e aggregate, indicate matters that could have a significant effect on the City's [mancial reporting process. W c did pr~,. e 24 journal entries that are considered year end accounting entries that a City should make in order to have accurate records before an audit begins. Vl e encourage the City to reduce the accounting entries necessary to adjust year end balances. We noted no uncorrected misstatements. Disagreements with Management For purposes of this letter, professional standards defme a disagreement with management as a matter, whether or not resolved to. our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the [mancial statemen or the auditor's report. \Ve are pleased to report that no such disagreements arose during the course of our audit. 952.835.9090 . Fax 952.835.3261 www.aemcpas.com