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• ~ ~ Elk River Municipal Utilities <br />Apri19, 2009 <br />~~ ~. Page 4 <br />I ~,_ <br />Planned Scope and Timing of the Audit <br />We performed the audit according to the planned scope and timing. <br />Qualitative Aspects of Accounting Practices <br />Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used <br />by the Utilities are described in Note 1 to the financial statements. The Utilities implemented the requirements of GASB 45 <br />during the year and the application of existing policies was not changed during the year ended December 31, 2008. We noted no <br />transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or <br />consensus. There are no significant transactions that have been recognized in the financial statements in a different period than <br />when the transaction occur ed. <br />Accounting estimates are an integral part of the financial statements prepared by management and are based on management's <br />knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are <br />particularly sensitive because of their significance to the financial statements and because of the possibility that future events <br />affecting them may differ significantly from those expected. The most sensitive estimate affecting the financial statements was <br />capital asset basis and depreciation. <br />Management's estimate of these accounting estimates is based on estimated or actual historical cost and the estimated useful lives <br />of capital assets. We evaluated the key factors and assumptions used to develop these accounting estimates in determining that it <br />is reasonable in relation to the financial statements taken as a whole. <br />The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement disclosures are <br />particularly sensitive because of their significance to financial statement users. <br />Difficulties Encountered in Performing the Audit <br />We encountered no significant difficulties in dealing with management in performing and completing our audit <br />952.835.9090 Fax 952.835.3261 <br />www.aemcpas.com <br />