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SIGNATURE ROBERT A. LAATZ
TITLE VICE PRESIDENT
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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Checkers Simon & Rosner
EXHIBIT 77B
December 10, 1998
To the Board of Directors
Perritt MicroCap Opportunities Fund, Inc.
In planning and performing our audit of the financial statements of
Perritt MicroCap Opportunities Fund, Inc. (the "Fund") for the year ended
October 31, 1998, we considered its internal control in order to determine our
auditing procedures for the purpose of expressing our opinion on the financial
statements and not to provide assurance on internal control. However, we noted
certain matters involving internal control and its operation that we consider to
be reportable conditions under standards established by the American Institute
of Certified Public Accountants. Reportable conditions involve matters coming
to our attention relating to significant deficiencies in the design or operation
of internal control that, in our judgment, could adversely affect the
organization's ability to record, process, summarize and report financial data
consistent with the assertions of management in the financial statements.
Our consideration of internal control was for the limited purpose
described in the preceding paragraph and would not necessarily disclose all
matters that might be reportable conditions. In addition, because of inherent
limitations in any internal control, errors or fraud may occur and not be
detected by such control.
During our audit, we noted the following reportable conditions and
other comments and observations.
Two important functions were not being performed: (1) quarterly
subchapter M calculations to ensure with the Fund's tax-exempt status, and (2)
expense reimbursement limitation calculations. Also, management was not
adequately reviewing information furnished by Firstar, resulting in a failure to
detect a significant inconsistency in an expense classification. Further,
management was not adequately reviewing information prepared by an independent
contractor, including financial reports, regulatory filings, calculations and
related documentation.
Although we have no responsibility to perform audit procedures on the
interim financial reporting or the NSAR filing, the following errors came to our
attention as a result of performing our audit procedures, which might have been
detected through an adequate review by management:
In the interim financial statements _
a The statement of changes in net assets did not present
information for the preceding fiscal year, as required.
b The "Statement of Operations" was mislabeled as the "Statement of
Changes."
c Financial information was not labeled as unaudited, as required.
Also, a question in the April 30, 1998 NSAR filing was answered
incorrectly. The question asked, "Did registrant/series have any of the
following outstanding at any time during the current period which exceeded 1
percent of aggregate net assets_overdrafts?" The question was answered "No,"
yet, for a period of over two months, the Fund had overdrafts of up to 35
percent.
Management is responsible for ensuring that the Fund complies with all
laws and regulations and that financial statements and other information are
accurate. One or more members of management should be assigned responsibilities
of preparing quarterly subchapter M calculations and monthly expense
reimbursement limitation calculations. Also, one or more members of management
should be assigned the responsibilities for review of information prepared by
Firstar and the independent contractor, as well as the interim financial
reporting and NSAR filings. These responsibilities should be assigned to
qualified individuals with appropriate skills and training. Procedures should
then be established to ensure timely performance of these functions.
Implementation of these procedures will reduce the likelihood of instances of
noncompliance with laws and regulations and that financial statements and other
information are accurate.
This report is intended solely for the information and use of the
Board of Directors and management of the Fund.
Checkers, Simon & Rosner LLP
