In accordance with the firm's Quality Control Policies and Procedures, Chapter 6, Monitoring, we evaluated compliance with Cotton & Company quality control policies and procedures through a periodic inspection covering the year ended June 30, 2004.

We planned and performed our work in accord with prevailing AICPA requirements of the Peer Review Program Manual. Charles Hayward, CPA, was the principal reviewer and responsible for this report's content. Alan Rosenthal, CPA, assisted by selecting a sample of Mr. Hayward's engagements and evaluating compliance against the firm's quality control criteria. Both Mr. Hayward and Mr. Rosenthal are partners in the firm.

• Independence, integrity, and objectivity
• Personnel management
• Acceptance and continuance of clients and engagements
• Engagement performance
• Monitoring

We selected samples from a universe that included all A&A (accounting and auditing) engagements completed within the year ended June 30, 2004. A&A engagements are those that were required to comply with the Government Accountability Office (GAO) Yellow Book or any of the following AICPA Standards:

• Statements on Auditing Standards (SAS)
• Statements on Standards for Accounting and Review Services (SSARS)
• Attestation (AT) Standards

Our engagement sample selection logic was designed to assure at least one engagement was evaluated for each firm partner who performed A&A work during the year covered by the inspection. One or more engagements per partner were selected. The engagements covered our major industry concentration (governmental audit) and our sampling considered the firm's high-risk areas.

RESULTS

Results of the self-inspection indicated that the firm was in compliance with the firm's quality control policies and procedures. Our inspection procedures disclosed no deficiencies or conditions that would require the firm to take action to prevent future reliance on reports issued by the firm or require the firm to perform additional procedures to provide a basis for the report issued. Our inspection procedures also identified certain isolated compliance matters that were individually insignificant and will be communicated to partners and separately resolved.