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Mayfield ~Ilage Engagement Letter August 3, 2010 Page 3 noncompliance might reasonably directly and materially affect the financial statements. However, our objective is not to opine on overall compliance with these provisions. Your Responsibilities: Management and those charged with governance are responsible for: 1. Being knowledgeable of, and complying with, laws, regulations, contracts, and grants applicable to the Village. 2. Identifying for us other financial audits, attestation engagements, performance audits, internal audits, reports from regulators or other studies related to the Village (if any), and the corrective actions taken to address these audits' significant findings and recommendations. 3. Tracking the status of prior audit findings. 4. Taking timely and appropriate steps to remedy fraud, illegal acts, violations of provisions of laws, regulations, contracts or grant agreements, or abuse we may report. 5. Providing your views and planned corrective action on audit findings we may report. Internal Control Our Responsibilities: As a part of our audit, we will consider the ~Ilage's internal control (as part of our understanding of the Vllage's operating environment), as required by generally accepted auditing standards and Government Auditing Standards. These standards require us to obtain an understanding of internal control and the village's environment, and assess risk to determine the nature, timing, and extent of auditing procedures necessary for expressing our opinion on the financial statements. Our objective does not include opining on internal control over financial reporting. While our audit is not designed to identify significant deficiencies, as required by Government Auditing Standards, we will prepare a written report to those charged with governance describing any significant deficiencies or material weaknesses we may detect. Your Responsibilities: Maintaining internal control over financial reporting and over compliance is management's responsibility. Appropriate supervisory reviews are necessary to reasonably assure that adopted policies and prescribed procedures are followed. Your Responsibility for Service Organizations: Service organizations are entities to which you have outsourced accounting functions. Service organizations process transactions reflected in your Vllage's financial statements, and therefore fall within the scope of our audit. While service organizations are responsible for establishing and maintaining their internal control, you are responsible for being aware of the service organizations your Village uses, and for establishing controls to monitor the service organization's performance. Because the complexity of service organization transaction processing can vary considerably, your monitoring activities can vary accordingly. When transaction processing is complex and the volume of transactions is relatively high, obtaining and reviewing a service organization auditor's Report on Controls Placed in Operation and Tests of Operating Effectiveness may be the most effective method of meeting your responsibility to monitor a service organization,,and may also be the only efficient means by which we can obtain sufficient evidence regarding their internal controls. Statement on Auditing Standards No. 70 (SAS 70) discusses the aforementioned report. (In some circumstances, we can accept asuitably-designed agreed-upon