02-12-2019 McMahan & Associates 2018 Audit Engagement LetterMCMAHAN AND ASSOCIATES, L.L.C.
Certified Public Accountants and Consultants
WEB SITE: WWW.MCMAHANCPA.COM
CHAPEL SQUARE, BLDG C MAIN OFFICE: (970) 845-8800
245 CHAPEL PLACE, SUITE 300 FACSIMILE: (970) 845-8 1 08
P.O. Box 5850, AvON, CO 8 1 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM
February 12, 2019
Town of Avon, Colorado
P.O. Box 975
Avon, CO 81620
We are pleased to confirm our understanding of the services we are to provide Town of Avon, Colorado
for the year ended December 31, 2018. We will audit the financial statements of the governmental
activities, the business -type activities, each major fund, and the aggregate remaining fund information,
including the related notes to the financial statements, which collectively comprise the basic financial
statements of Town of Avon, Colorado as of and for the year ended December 31, 2018.
Accounting principles generally accepted in the United States of America provide for certain required
supplementary information ("RSI"), such as management's discussion and analysis ("MD&A"), to
supplement Town of Avon, Colorado's basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board, who
considers it to be an essential part of financial reporting for placing the basic financial statements in an
appropriate operational, economic, or historical context. As part of our engagement, we will apply certain
limited procedures to Town of Avon, Colorado's RSI in accordance with auditing standards generally
accepted in the United States of America. These limited procedures will consist of inquiries of
management regarding the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We will not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance. The following RSI is required by
generally accepted accounting principles and will be subjected to certain limited procedures, but will not
be audited:
1) Management's Discussion and Analysis.
We have also been engaged to report on RSI other than MD&A and supplementary information other
than RSI that accompanies Town of Avon, Colorado's financial statements. We will subject the following
RSI and supplementary information to the auditing procedures applied in our audit of the basic financial
statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America.
We intend to provide an opinion on the following RSI and supplementary information in relation to the
financial statements as a whole:
1) Budgetary schedules for the General Fund and major special revenue funds
2) Budget schedules for all other funds
3) Combining statements
4) Local Highway Finance Report
5) Debt Schedule
Member: American Institute of Certified Public Accountants
PAUL J. BACKES, CPA, CGMA AvON: (970) 845-8800
MICHAEL N. JENKINS, CA, CPA, CGMA ASPEN: (970) 544-3996
DANIEL R. CUDAHY, CPA, CGMA FRISCO: (970) 668-3481
February 12, 2019
Town of Avon, Colorado
Page 2
The following other information accompanying the financial statements will not be subjected to the
auditing procedures applied in our audit of the financial statements, and our auditor's report will not
provide an opinion or any assurance on that other information:
1) Introductory information
2) Statistical information
Audit Objective
The objective of our audit is the expression of opinions as to whether the Town's basic financial
statements are fairly presented, in all material respects, in conformity with accounting principles generally
accepted in the United States of America and to report on the fairness of the supplementary information
referred to in the fourth paragraph when considered in relation to the financial statements as a whole.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America and will include tests of the accounting records and other procedures we consider necessary
to enable us to express such opinions. If our opinions on the financial statements are other than
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.
Management Responsibilities
Management is responsible for the basic financial statements and all accompanying information as well
as all representations contained therein. As part of our engagement, we will assist with preparation of
your financial statements and related notes. You are responsible for making all management decisions
and performing all management functions; for designating an individual with suitable skill, knowledge, or
experience to oversee our assistance with the preparation of your financial statements and related notes
and any other non -attest services we provide; and for evaluating the adequacy and results of those
services and accepting responsibility for them.
Management is responsible for establishing and maintaining effective internal controls, including
monitoring ongoing activities; for the selection and application of accounting principles; and for the
preparation and fair presentation of the financial statements in conformity with accounting principles
generally accepted in the United States of America.
Management is also responsible for making all financial records and related information available to us
and for ensuring that management is reliable and that financial information is reliable and properly
recorded. You are also responsible for providing us with (1) access to all information of which you are
aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional
information that we may request for the purpose of the audit, and (3) unrestricted access to persons
within the government from whom we determine it necessary to obtain audit evidence.
Your responsibilities include adjusting the financial statements to correct material misstatements and
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 financial statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government
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. Your
responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud
affecting Town of Avon received in communications from employees, former employees, regulators, or
others. In addition, you are responsible for identifying and ensuring that Town of Avon complies with
applicable laws and regulations.
February 12, 2019
Town of Avon, Colorado
Page 3
Management Responsibilities (continued)
You are responsible for the preparation of the supplementary information in conformity with accounting
principles generally accepted in the United States of America. You agree to include our report on the
supplementary information in any document that contains and indicates that we have reported on the
supplementary information. You also agree to include the audited financial statements with any
presentation of the supplementary information that includes our report thereon. Your responsibilities
include acknowledging to us in the representation letter that (1) you are responsible for presentation of
the supplementary information in accordance with accounting principles generally accepted in the United
States of America; (2) that you believe the supplementary information, including its form and content, is
fairly presented in accordance with accounting principles generally accepted in the United States of
America; (3) that the methods of measurement or presentation have not changed from those used in the
prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us
any significant assumptions or interpretations underlying the measurement or presentation of the
supplementary information.
With regard to using the auditor's report, you understand that you must obtain our prior written consent to
reproduce or use our report in bond offering official statements or other documents.
With regard to the electronic dissemination of audited financial statements, including financial statements
published electronically on your website, you understand that electronic sites are a means to distribute
information and, therefore, we are not required to read the information contained in these sites or to
consider the consistency of other information in the electronic site with the original document.
Audit Procedures—General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; 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 financial statements. We will plan and
perform the audit to obtain reasonable rather than absolute assurance about whether the financial
statements 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 entity or to acts by management or employees acting on behalf of the entity.
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 may exist and not be detected by us, even though the audit is properly planned and
performed in accordance with auditing standards generally accepted in the United States of America. 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 financial statements.
However, we will inform the appropriate level of management of any material errors or any fraudulent
financial reporting or misappropriation of assets that come 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. Our responsibility as auditors is limited to the period covered by
our audit and does not extend to any later periods for which we are not engaged as auditors.
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 your attorneys
as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our
audit, we will require certain written representations from you about the financial statements and related
matters.
February 12, 2019
Town of Avon, Colorado
Page 4
Audit Procedures—Internal Control
Our audit will include obtaining an understanding of the Town 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. An audit is not designed to provide assurance
on internal control or to identify deficiencies in internal control. However, during the audit, we will
communicate to management and those charged with governance internal control related matters that are
required to be communicated under AICPA professional standards.
Audit Procedures—Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we will perform tests of Town of Avon's compliance with the provisions of applicable laws,
regulations, contracts, and agreements. However, the objective of our audit will not be to provide an
opinion on overall compliance and we will not express such an opinion.
Engagement Administration, Fees, and Other
We understand that your employees will prepare all cash or other confirmations we request and will
locate any documents selected by us for testing.
Paul J. Backes, C.P.A. is the engagement partner and is responsible for supervising the engagement and
signing the report or authorizing another individual to sign it. Additional firm personnel will be assigned to
the engagement as considered necessary. We will begin our audit and issue our reports on a mutually
agreed-upon date.
At the conclusion of our audit engagement, we will communicate to the Governing Board the following
significant findings from the audit:
• Our view about the qualitative aspects of the entity's significant accounting practices;
• Significant difficulties, if any, encountered during the audit;
• Uncorrected misstatements, other than those we believe are trivial, if any;
• Disagreements with management, if any;
• Other findings or issues, if any, arising from the audit that are, in our professional judgment,
significant and relevant to those charged with governance regarding their oversight of the
financial reporting process;
• Material, corrected misstatements that were brought to the attention of management as a result of
our audit procedures;
• Representations we requested from management;
• Management's consultations with other accountants, if any; and
• Significant issues, if any, arising from the audit that were discussed, or the subject of
correspondence, with management.
February 12, 2019
Town of Avon, Colorado
Page 5
Engagement Administration, Fees, and Other (continued)
Our fee for these services will be at our standard hourly rates plus out-of-pocket costs (such as report
reproduction, word processing, postage, travel, copies, telephone, etc.) except that we agree that our
gross fee, including expenses will not exceed $22,000 for the 2018 engagement. Our standard hourly
rates vary according to the degree of responsibility involved and the experience level of the personnel
assigned to the engagement. Our invoices for these fees will be rendered each month as work
progresses and are payable on presentation. In accordance with our firm policies, work may be
suspended if your account becomes overdue and may not be resumed until your account is paid in full. If
we elect to terminate our services for nonpayment, our engagement will be deemed to have been
completed upon written notification of termination, even if we have not completed our report, and you will
be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs
through the date of termination. Our fee estimate is based on anticipated cooperation from your
personnel and the assumption that unexpected circumstances will not be encountered during the audit.
significant additional time is necessary, we will keep you informed of any problems we encounter and our
fees will be adjusted accordingly. We want the Town to feel that the value of services provided by our
firm is commensurate with the fee charged.
We appreciate the opportunity to be of service to Town of Avon, Colorado and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please let us
know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed
copy, and return it to us.
Sincerely,
MccMAHAN and ASSOCIATES, L.L.C.
AX-4,
RESPONSE:
This letter correctly sets forth the understanding of Town of Avon, Colorado with respect to services to be
provided by McMahan and Associates, L.L.C.
Town of Avon, Colorado
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