SINCE THE SUBCONTRACTOR IS LOCATED IN CANADA, THE COMPTROLLER GENERAL HAS HELD DISCUSSIONS WITH THE AUDITOR GENERAL ON MUTUALLY AGREEABLE ARRANGEMENTS FOR CARRYING OUT THE DESIRED EXAMINATION OF BOOKS, DOCUMENTS, PAPERS, RECORDS, AND THE AUDIT. THE PURPOSE OF SUCH EXAMINATION IS TO TEST WHETHER, AS DISCLOSED BY THE CONTRACT DOCUMENTS, THE INTERESTS OF THE UNITED STATES WERE PROPERLY SAFEGUARDED BY THE DEPARTMENT OF THE NAVY IN THE TRANSACTION. THE AUDITOR GENERAL WILL INITIALLY CONDUCT PRELIMINARY EXAMINATIONS OF THE SUBCONTRACTS TO DETERMINE THE NEED FOR A MORE DETAILED EXAMINATION AND PREPARE A REPORT THEREON. THE COMPTROLLER GENERAL WILL DECIDE, AFTER REVIEW OF THE REPORT, WHETHER A MORE DETAILED REVIEW IS REQUIRED. IF REQUIRED, THE SCOPE OF THE REVIEW SHALL INCLUDE ALL ITEMS THE COMPTROLLER GENERAL REGARDS AS NECESSARY. STAFFING ASSISTANCE AND TECHNICAL AID WILL BE PROVIDED BY THE COMPTROLLER GENERAL; NOT LESS THAN TWO STAFF MEMBERS WILL BE INCLUDED. IF EXCEPTIONAL CIRCUMSTANCES SHOULD ARISE AND THE AUDITOR GENERAL IS UNABLE TO PERFORM THE EXAMINATION AND AUDIT, THE COMPTROLLER GENERAL MAY PERFORM THE AUDIT OF PRATT WHITNEY OF CANADA WITH HIS OWN RESOURCES. THIS ARRANGEMENT, DATED OCTOBER 1977, WILL ENTER INTO FORCE WITH AN EXCHANGE OF DIPLOMATIC NOTES BETWEEN THE UNITED STATES AND CANADA. FOOTNOTES AND DIPLOMATIC NOTES ARE INCLUDED WITH THE MEMORANDUM. (LWM)