CONTRACT FOR AUDIT SERVICES

1. SCOPE OF SERVICE

CONTRACTOR agrees to provide a quarterly financial and compliance audit herein referred to as the CLIENT, for
the fiscal years ending April 1, 2016, to March 31, 2017.

The required audit function is to express an opinion on the fairness of the CLIENT’s financial statements, and to
determine the CLIENT’s compliance with applicable laws and regulations.

2. TERMINATION OF CONTRACT

a. Termination without cause. This contract may be terminated by mutual consent of both parties, or by either
party upon 30 days' written notice.

b. Termination for lack of funding or authority. The STATE may terminate this contract effective upon
delivery of written notice to the CONTRACTOR, or on any later date stated in the notice, under any of the
following conditions:

1) If funding from federal, state, or other sources is not obtained and continued at levels sufficient to allow
for purchase of the services or supplies in the indicated quantities or term. The contract may be
modified by agreement of the parties in writing to accommodate a reduction in funds.

2) If federal or state laws or rules are modified or interpreted in such a way that the services are no longer
allowable or appropriate for purchase under this contract or are no longer eligible for the funding
proposed for payments authorized by this contract.

3) If any license, permit or certificate required by law or rule, or by the terms of this contract, is for any
reason denied, revoked, suspended or not renewed.

Any termination of this contract under this subsection will be without prejudice to any obligations or liabilities of
either party already accrued prior to termination.

c. Termination for cause. The STATE by written notice of default (including breach of contract) to the
CONTRACTOR may terminate the whole or any part of this contract:

1) If the CONTRACTOR fails to provide services called for by this contract within the time specified or
any extension agreed to by the STATE; or

2) If the CONTRACTOR fails to perform any of the other provisions of this contract, or so fails to pursue
the work as to endanger performance of this contract in accordance with its terms, and after
receipt of written notice from the STATE, fails to correct such failures within ten days or such longer
period as the STATE may authorize.

UNCLASSIFIED
1
The rights and remedies of the STATE provided in the above clause related to defaults (including breach of
contract) by the CONTRACTOR are not exclusive and are in addition to any other rights and remedies provided by
law or under this contract.

6. FORCE MAJEURE

CONTRACTOR shall not be held responsible for delay or default caused by fire, riot, acts of God or war if the
event is beyond the CONTRACTOR’s reasonable control and the CONTRACTOR gives notice to the STATE
immediately upon occurrence of the event causing the delay or default or which is reasonably expected to cause a
delay or default.

7. MERGER AND MODIFICATION

This c o n t r a c t c o n s t i t u t e s the entire agreement between the parties. There are no

understandings, agreements, or representations, oral or written, not specified within this

contract. This contract may not be waived, altered, modified, supplemented, or amended, in any manner, except
by written agreement signed by both parties.

8. SEVERABILITY

If any term of this contract is declared by a court having jurisdiction to be illegal or unenforceable, the
validity of the remaining terms will not be affected, and, if possible, the rights and obligations of the parties are to be
construed and enforced as if the contract did not contain that term.

9. ASSIGNMENT AND SUBCONTRACTS

CONTRACTOR may not assign or otherwise transfer or delegate any right or duty without the express written
consent of the STATE. However, the CONTRACTOR may enter into subcontracts provided that any such
subcontract acknowledges the binding nature of this contract and incorporates this contract, including any
attachments. CONTRACTOR agrees to be solely responsible for the performance of any subcontractor.
CONTRACTOR shall not have the authority to contract for or incur obligations on behalf of the STATE.

10. NOTICE

All notices or other communications which are required under this contract must be given by registered or certified
mail and are complete on the date mailed when addressed to the parties at the following addresses:

CPA Person, CPA Ron Tolstad Jr., CPA Title

Technical Specialist

CPA Firm Office of the State Auditor

Address 600 E. Blvd. Ave.

City, ND Zip Bismarck, ND 58503-0060

UNCLASSIFIED
2
11. APPLICABLE LAW AND VENUE

This contract is governed by and construed in accordance with the laws of the State of North Dakota. Any action
commenced to enforce this contract must be brought and solely litigate in the District Court of Burleigh County,
North Dakota.

12. INDEMNITY

The State and Contractor each agrees to assume its own liability for any claims of any nature including all costs,
expenses and attorneys' fees which may in any manner result from or arise out ofthisagreement.

17. CONFIDENTIALITY

CONTRACTOR agrees not to use or disclose any information it receives from the STATE under this contract
which the STATE has previously identified as confidential or exempt from mandatory public disclosure except
as necessary to carry out the purposes of this contract or as authorized in advance by the STATE. The STATE
agrees not to disclose any information it receives from CONTRACTOR which the CONTRACTOR has
previously identified as confidential and which the STATE determines in its sole discretion is protected from
mandatory public disclosure under a specific exception to the North Dakota open records law, North Dakota Century
Code § 44-04-18. The duty of STATE and CONTRACTOR to maintain confidentiality of information under this
section continues beyond the term of this contract, including any extensions or renewals.

UNCLASSIFIED
3
Overview of the agreement

Purpose of this agreement

1.1 This agreement sets out the basis on which [Audit Firm name], referred to as “the Audit Firm” will provide internal audit services
to [Auditee Company name] referred to as “the Auditee Company”.

Context
1.2 [Background to the agreement and the Auditee Company’s requirements.]

Summary scope of services

1.3 [Audit Firm name] has been engaged to provide the Auditee Company with [internal audit services as agreed amongst both parties
e.g. fully outsourced or co-sourced internal audit services, including any additional special projects, investigations and advisory
services]. [Further details are provided in Annex E (if applicable)].

Applicable standards
1.4 The services defined above will be conducted in full accordance with the Public Sector Internal Audit Standards (PSIAS) and the
Audit Firm will monitor and report on the service provided in accordance with the applicable Government Internal Audit
Performance Measures (see Annex A).

Commencement date and duration

1.5 The commencement date for the services will be [day/month/year and will run until day/month/year].

Confidentiality and ownership of books and records

1.6 The classification of all papers, information and material coming to the attention of and produced by the Audit Firm shall be
respected. They may not be disclosed to any person outside the Auditee Company without the permission of the Internal Audit
Sponsor and the Audit Firm, unless expressly required by law. Where the disclosure of information is required for consolidation
within a departmental family, this permission may not be unreasonably withheld.

1.7 All reports, working papers, documents and other data held (including electronic) or generated by the Audit Firm as a result of
audit activity shall be the property of the Auditee Company but will be held within the Audit Firm’s file management system.

1.8 Personal data received and required as part of an audit will be stored, transferred and destroyed securely in-line with Cabinet Office
standards on information security.

UNCLASSIFIED
4
2 Auditee Company Responsibilities

2.1 The CFO and the Board of the Auditee Company are responsible for ensuring that there are effective arrangements for governance,
risk management.

2.2 In accordance with the agreed scope of services (see 1.2 above) the Auditee Company will:

 Appoint an overall Co-ordinator for internal audit (the “Internal Audit Coordination”). This individual will be
responsible for providing input to the development of the internal audit plan, including provision of an Assurance
Framework to enable the Audit Firm to ensure proper coverage, that its resources are used efficiently and to minimise
duplication of effort.

 Ensure that the internal audit plan [developed by the Audit Firm] is reviewed and approved by the Accounting Officer
and Audit Committee [as appropriate].

 Ensure the [Group Chief Internal Auditor (GCIA) / Designated Head of Internal Audit (HIA) / Relationship Manager]
has access to the [Accounting Officer / Board / Audit Committee] on a [frequency as agreed between the two parties]
basis.

 Assign an Engagement Sponsor for each review.

 Provide access to all necessary information including records, documents and correspondence relating to the agreed
audit activity, including information requiring security clearance to review, for which the Audit Firm will have a duty to
safeguard and handle appropriately under the prevailing central government Security Policy Framework.

 Allow access at all reasonable time to any land, premises or member of staff of the Auditee Company.

2.3 Responsibility for implementing the recommendations identified by the Audit Firm as a result of the agreed scope of work rests
with the management team of the Auditee Company.

UNCLASSIFIED
5
3 Audit Firm Responsibilities

3.1 The Audit Firm will assign an Audit Manager who will lead the provision of services to the Auditee Company.

3.2 In accordance with the agreed scope of work (see 1.2 above) the Audit Firm will:

 [Develop a quarterly internal audit plan using an appropriate risk-based approach, which meets the Auditee Company’s
needs and takes account of other sources of assurance.

 Meet with the External Auditors to co-ordinate the respective scope of work and provide access to internal audit
documentation as required.

 Deploy internal auditors with sufficient knowledge, skills and experience to deliver the agreed scope of work.

 Meet with the key contacts at the end of the fieldwork to confirm the factual accuracy of the internal audit findings.

 Verify physical fixed assets of the company

 Provide a draft report (in accordance with the format set out in Annex C) or equivalent, with details of the findings,
implications and proposed actions for review and agreement by the key contacts, before submission and finalisation of
the report with the Engagement Sponsor.

 Hold meetings on a quarterly basis, to update the Internal Audit progress.

 Provide reports to the CFO, and Audit Committee at quarterly intervals on the progress against and results of the agreed
scope of work.

 Provide a quarterly Internal Audit Report to the CFO which will include:
o A review of the work undertaken in the last [quarterly / six-months / year] and developments in
governance, risk management and control during the period;
o An opinion on the adequacy and effectiveness of the Auditee Company’s framework of governance,
risk management and control; and

UNCLASSIFIED
6
Terms and Conditions for Customized Audit Services
2. DEFINITIONS

“Audit Program” means the document against which the Company will perform
the Services

“Client” means any organisation to which the Company will provide the Services
and shall include Client’s successors and assigns.

“Deliverable” means the Audit Report and if applicable, a certificate, that will be
provided by the Company to the Client upon completion of the Services.

“Services” means audits of the Client performed by the Company using the Audit
Program.

3. PROVISION OF SERVICES

(a) The Company will provide the Services using reasonable care and skill and in
accordance with (i) the limits of the instructions received by the Client and (ii)
the content of the Audit Program as defined in the Application for Assessment
Audits.

(b) The content of the Deliverable represents the Company’s review of facts and
documents in existence at the time of performance of the Services only and
within the limits of the instructions received and are solely for the benefit of the
Client which is responsible for acting as they see fit on the basis of such
Deliverables.

(c) The Company may delegate the performance of all or part of the Services to
an agent or subcontractor and Client authorises Company to disclose all
information necessary for such performance to the agent or subcontractor.

(d) Client acknowledges that the Company, by providing the Services, neither
takes the place of Client or any third party, nor releases them from any of their
obligations, nor otherwise assumes, abridges, abrogates or undertakes to
discharge any duty of Client to any third party or that of any third party to Client.

4. OBLIGATIONS OF CLIENT

(a) Provide the Company with all necessary and requested access to Client’s
books, codes of practice, records, information systems and facilities such that the
Company may render the Services;

pollution or poisons.

UNCLASSIFIED
1
5. FEES AND PAYMENT

(a) The Company shall invoice the Client as agreed or upon issuance of the Audit
Report. Invoices for additional and further work will be issued on completion of
the relevant task.

6. TERMINATION

(a) The Contracts are generally meant to last for fixed periods of time either
directly related to the validity of the relevant certificates issued or to the type of
Services to be rendered, they may be renewed thereafter.

(b) Unless otherwise agreed in writing the Client shall be entitled to terminate the
Contract at any time by giving not less than thirty days’ notice in writing to the
Company. If the Client terminates the Contract (other than by reason of default
by the Company in its obligations) the Company shall be entitled to charge the
Client reasonable fees at its prevailing rates and expenses in respect of work
carried out by it for the Client prior to termination.

(c) Unless otherwise agreed in writing, either Party may terminate the Contract
by reason of serious default by the other party (the “Breaching party”) in its
obligations at any time by giving not less than thirty (30) days’ notice in writing
to the Breaching Party after the Breaching Party failed to fix the notified default
within thirty 30 days from notification.

(d) Either Party shall be entitled to terminate provision of the Services in the
event of any arrangement with creditors, bankruptcy, insolvency, receivership or
cessation of business by the other Party.

(e) Unless otherwise agreed in writing the obligations of the parties defined in
article 8 below shall apply notwithstanding the completion of the Services or
termination of the Contract.

8. CONFIDENTIALITY

As used herein, “Confidential Information” shall include the Client Information

and any information oral or written that a party may acquire from the other party
pursuant to the Contract provided, however, that Confidential Information shall
not include any information which (1) is or hereafter becomes generally known to
the public; (2) was available to the receiving party on a non-confidential basis
prior to the time of its disclosure by the disclosing party; (3) is
disclosed by an independent third party with a right to make such disclosure.
Unless required by law, neither party shall disclose the other’s Confidential
Information to any person or entity except as expressly provided for herein.

UNCLASSIFIED
2
9. FORCE MAJEURE

If the Company is prevented by reason of any cause whatsoever outside the

Company's control from performing or completing any service for which a
Contract has been made, the Client will pay to the Company

(a) the amount of all abortive expenditures actually made or incurred;

(b) a proportion of the agreed fees equal to the proportion (if any) of the service
actually carried out; and the Company shall be relieved of all responsibility
whatsoever for the partial or total non-performance of the required Services.

11. MISCELLANEOUS

(a) If any one or more provisions of these Terms and Conditions are found to be
illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

(b) Except as expressly provided for herein, the Client may not assign any of
their rights or obligations hereunder without the Company’s prior written
consent.

(c) Use of the Company’s corporate name or registered marks for advertising
purposes is not permitted without the Company’s prior written authorisation.

12. GOVERNING LAW, JURISDICTION AND DISPUTE RESOLUTION

Unless specifically agreed otherwise, all disputes arising out or in connection

with Contractual Relationship(s) hereunder shall be governed by the substantive
laws of England exclusive of any rules with respect to conflicts of laws and be
finally settled under the Rules of Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with the said
rules. The arbitration shall take place in Paris (France) and be conducted in the
English language.

UNCLASSIFIED
3
1. This Agreement, between (the
Organization) and

(the Auditor Firm), shall be effective as

of the date of execution below.

2. The Audit Firm will audit the financial records, accounts and
statements of (Auditee Company)

as of and for the year ended

. All be audited are as contained in Exhibit A, which is
attached to and is a part of this contract.

3. The audit will be conducted in accordance with generally

accepted auditing standards; the standards for financial audits
contained in Auditing Standards.

4. The audit will include tests of the accounting records and

such other audit procedures as necessary to express an
independent opinion on the financial statements and Reports
on Compliance with Laws and Regulations and the Internal
Control Structure.

5. The Auditor Firm will plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free from material misstatement. Under the concept of
reasonable assurance, the Auditor Firm will exercise its
judgement about the number of

transactions to be examined and the areas to be tested. There is,

therefore, a risk that material errors, irregularities or illegal acts,
including fraud or defalcations, may exist and not be detected.
The Auditor Firm will, however, advise immediately the DECD
of any such matters that come to its attention. The Auditor
Firm’s responsibility is limited to the period covered by the audit
and does not extend to matters that might arise during any later
periods.

6. The Auditor Firm understands that it has the responsibility:

UNCLASSIFIED
4
 a. to prepare the audit reports in accordance with the
requirements of Government Auditing Standards, the DECD
Audit Guide (and the State Single Audit Act (CGS 4-230 to
4-236) and/or the Federal Single Audit Act (OMB Circular
A-133) as applicable); and

b. to notify DECD within five (5) business days of its

termination or cessation of services to the (organization).

7. Entrance and exit conferences will be held with the (the

Organization) management, and the

Auditor Firm’ representatives.

8. (Auditee Company) management responses to draft audit reports

will be delivered to the
Auditor Firm for inclusion in the final reports, where practical.
9. The Auditor Firm will immediately notify the (Auditee
Organisation) of any significant and/or reportable
conditions noted during the course of the audit.

10. The terms of this Agreement may be modified only in writing,

signed by duly authorized representatives of the parties.

11. This Agreement, which includes the matter specifically

incorporated by reference, constitutes the entire agreement
between the parties.

Executed on the day of (Month), (Year) for the

parties by their duly authorized representatives.
------------------------------
---------------------

[Authorized Organization Official]

[Authorized Audit Firm]

UNCLASSIFIED
5
Annex A – [The agreed] performance measures

Annexure A
1. Fixed Assets
a) Verification of purchase orders and capitalization of fixed assets
of all the divisions as per the purchase policy of the company.
b) Periodic verification of fixed assets to ensure safeguard of Assets
c) Verification of depreciation calculation
d) Verification of Insurance coverage for fixed assets.

2. Internal Control
Verify effectiveness of internal controls including all policies and
procedures to ensure:
a) Existence of reliable reporting systems;
b) Safeguard of assets;
c) Prevent and detect errors and frauds; and
d) Optimize the use of resources.

3. Commitment of Funds / Delegation of Powers

Ensures that exercise of power to commit funds on purchases/
projects and also for making payments etc are within the scope of
powers delegated by the board for this purpose.

4. Fixed Deposits
a) Verification of Fixed Deposits with their original receipts.
b) Interest accrued on Fixed Deposits.
c) Verification of movement of Fixed Deposits

5. Cash and Bank

a) Physical cash verification.
b) Cash vouching.
c) Bank vouching.
d) Bank Reconciliation Statements.
e) Stale cheques
UNCLASSIFIED
6
 6. Income
a) Verification of income from different sources with corresponding
documents and deeds.
b) Verification of invoices

7 Movement of Refundable and Non Refundable Deposits

a) Verification of the lease deeds signed with new lessees and the
receipt of deposits & charges Refund or Adjustment security
b) Refund or Adjustment Secuity deposits where leases are
cancelled/terminated.

7. Expenses
a) Verification of invoices raised on tenants(lessees)
b) Verification of expenses, invoices,etc
c) Verification of prepaid expenses
d) Verification of provisional expenses (Outstanding expenses)
e) Recovery from parties ( utility bills)

8. Loans/OD availed, Security, Reports etc

Verification of principal & interest repayments as per the schedule.

9. Movement of Grant Funds

a) Verification of grant amounts sanctioned, received,spent,
outstanding,etc
b) Verification of loan / revenue sharing documents
c) Verification of the repayments received and accounting interest
d) Verification of utilization certificates.
e) Verification of unutilized grants funds with bank
balances(reconcile)

10. Segregation of Duties

Ensures that the Company exercises effective internal control by
segregating the duties of the officials and proper allocation of
delegation of powers to ensure avoidance of errors and frauds.

UNCLASSIFIED
7
 11. Statutory Compliances & maintenance of Checklists

Verification and reporting deviations, if any relating to compliances,

payment of statutory dues, etc as per due dates.

12. Statutory Payments

a) Service Tax
b) ESI
c) Provident Fund
d) Professional Tax
e) TDS
f) Issuance of Form 16A /16
g) Cross checking Form 26AS credit & reconciliation
h) VAT /WCT
i) Submission of Reports/Returns
j) Advance Self Assessment Tax
k) Reports & Notices/Demands/Assessments/Status of Court cases

13. Human Resources

a) Verification of salaries/exgratia paid and the deductions made
every month.
b) Verification of Professional/Consultation charges payable Vs Paid.
c) Verification of employee movement formalities.
d) Leave records.
e) Investment Proofs
f) Final settlement of Employees
g) Provisions for compensated absence and gratuity(Actuarial Value)
h) Employee Insurance(Including gratuity liability)

14. Others
a) Journal vouching.
b) Debtors ageing analysis
c) Budget Vs Actual analysis
d) Miscellaneous/other Income
e) Inter divisional dues reconciliation
f) FERA/FEMA compliance
g) Compliance with different policies
h) Changes in laws/guidelines
i) Licenses, renewal

UNCLASSIFIED
8
 j) Interest on delay payment
k) Board/Auditor committee – Action taken reports
l) Bad debts – Write offs
m) Changes in Board committee
n) CSR Activities
o) Other insurance policies
p) Contracts/Agreements
q) Refund Amounts/Advances

Annex B – Service Levels

Phase of [Audit Firm name] [Auditee Company name]
internal responsibilities responsibilities
audit
activity
Planning  Planning meetings with the Engagement sponsor to attend
Engagement Sponsor will be held planning meetings on agreed date
[e.g. 7 working days prior to audit Agree the ToR within [e.g. 5 days
start date] of receipt]
 Issue a draft Terms of Reference  Distribute ToR and book
(ToR) within [e.g. 5 days of the initial meetings with key
meeting] stakeholders
 Agree the ToR [e.g. within 5 days
of submission]
Fieldwork  Complete fieldwork in  Where relevant, ensure
accordance with the ToR during information requested is
the agreed fieldwork period available at the start of the
audit and all required
information is provided before
the close-out
 Conduct audit close-out meeting  Facilitate agreed attendance at
at agreed date (at end of the audit close-out
UNCLASSIFIED
9
 fieldwork period)
Reporting  Submit draft report to key  Agree draft report and provide
contacts within [e.g. 10 days of key contact’s agreed actions,
the close-out] owners and timescales within
 Submit final draft to Auditee [e.g. 10] days of receipt of the
Company within 5 days of receipt draft report
of key contacts comment]
 Finalise report within [e.g. 10]  Engagement Sponsor to
days of submissions to the review and finalise report
Engagement Sponsor within [e.g. 10] days of
submission

UNCLASSIFIED
10
 UNCLASSIFIED

UNCLASSIFIED