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SIGNATURE STAN PITTMAN
TITLE CHIEF FINANCIAL OFF.
[DESCRIPTION] Change of certifying accountant
COMBINED PENNY STOCK FUND, INC.
Sub-Item 77K - Changes in Registrant's Certifying Accounting
The Registrant makes the following disclosures as required by Sub-Item
77K of Form N-SAR, Item 4 of Form 8-K and Item 304 of Regulation S-K.
On September 30, 1996, the Registrant's former accountant Deloitte &
Touche LLP ("Deloitte & Touche") resigned as Registrant's accountant due to the
fact that Registrant's principal executive offices are located in Colorado
Springs, Colorado and Deloitte & Touche was closing its Colorado Springs,
Colorado office.
Deloitte & Touche's report on the Registrant's September 30, 1995
financial statements contained the following matter of emphasis:
The financial statements include securities valued at $244,000 at
September 30, 1995, representing 14% of net assets, whose values have
been estimated by the Board of Directors in the absence of readily
ascertainable market values, or are thinly traded securities. We have
reviewed the procedures used by the Board of Directors in arriving at
their estimate of value of such securities and have inspected
underlying documentation and in the circumstances, we believe the
procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been
used had a ready market for the securities existed, and the differences
could be material.
Other than the foregoing matter of emphasis, Deloitte & Touche's
reports on the Registrant's financial statements for the past two fiscal years
did not contain an adverse opinion or a disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
The decision to change accountants was unanimously approved by the
Board of Directors of the Registrant at a telephonic meeting held on November
14, 1996 at 10:00 a.m.
During the Registrant's two most recent fiscal years and the subsequent
interim period preceding Deloitte & Touche's resignation, there were no
disagreements with Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
During the Registrant's two most recent fiscal years and the subsequent
interim period preceding Deloitte & Touche's resignation, none of the events
requiring additional disclosure as set forth in Item 304(a)(1)(v) of Regulation
S-K occurred.
On September 30, 1996, the Registration engaged Stockman Kast Ryan
and Scruggs, P.C. of Colorado Springs, Colorado as its principal accountant
to audit its financial statements.
<PAGE>
Prior to the filing of this Form N-SAR with the Commission, the
Registrant provided Deloitte & Touche with a copy of the information disclosed
in this Sub-Item 77K. The Registrant has requested Deloitte & Touche to furnish
the Registrant with a letter addressed to the Commission stating whether it
agrees with the statements made by the Registrant in this Sub-Item 77K of Form
N-SAR and, if not, stating the respects in which it does not agree. The
Registrant has filed Deloitte & Touche's letter as an exhibit to this Form
N-SAR.
[DESCRIPTION] Change of auditor consent
November 20, 1996
Securities and Exchange Commission
Mail stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Sub-Item 77KK of Form N-SAR of
Combined Penny Stock Fund, Inc. dated September 30, 1996.
Yours truly,
/s/Deloitte & Touche LLP
[DESCRIPTION] Auditor's consent
To the Board of Directors and Shareholders,
Combined Penny Stock Fund, Inc.
In planning and performing our audit of the financial statements of Combined
Penny Stock Fund, Inc. (the Fund) for the year ended September 30, 1996 (on
which we have issued our report dated November 1, 1996), we considered its
internal control structure, including procedures for safeguarding securities, in
order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with requirements of Form
N-SAR, not to provide assurance on the internal control structure.
The management of the Fund is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected benefits and
related costs of internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss
from unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
September 30, 1996.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
/s/Stockman Kast Ryan & Scruggs, PC
Colorado Springs, Colorado
November 1, 1996
