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For IS -related controls that we deem to be ineffectively designed or not operating as intended, we will gather sufficient evidence to support appropriate findings and will provide recommendations to improve internal controls. For those IS controls that we deem to be effectively designed, we will perform testing to determine if they are operating as intended through a combination of procedures, including observation, inquiry, inspection, and re -performance. Phase 4: Testing & Analysis The extent of our substantive testing will be based on results of our internal control tests. It has been our experience that governmental entities, like the City, often have a system of internal controls that, with appropriately designed tests and correlation to account balances, can be used to limit the extent of account balance substantiation testing. Audit sampling will be used only in those situations where it is the most effective method of testing. Before deciding to sample, we will consider all possible approaches and audit techniques. Items where, in our judgment, acceptance of some sampling risk is not justified will be examined 100 percent. These may include unusual items or items for which potential misstatements could individually equal or exceed tolerable error. After identifying individually significant or unusual items, we will decide on the audit approach for the remaining balance of items by considering tolerable error and audit risk. This may include (1) testing a sample of the remaining balance; (2) lowering the previously determined threshold for individually significant items to increase the percent of coverage of the account balance; or (3) applying analytical procedures to the remaining balance. When we elect to sample balances, we will use IDEA to efficiently control and select our samples. Our work papers during this phase will clearly document our work as outlined in our audit programs. We will also provide the City with status reports during the audit fieldwork. As in all phases of the audit, we will be in communication with the City to determine that all identified issues are resolved in a timely manner. We will also hold a final exit conference with the City to summarize the results of our fieldwork and review significant findings. Reports to management will include oral and/or written reports regarding: • Independent auditors' report • Management letter • Written communication to those charged with governance, which includes the following areas: — Our responsibility under auditing standards generally accepted in the United States of America — Changes in significant accounting policies ortheir application — Unusual transactions — Management judgments and accounting estimates — Significant audit adjustments — Other information in documents containing the audited financial statements — Disagreements with the City — The City's consultations with other accountants — Major issues discussed with management prior to retention — Difficulties encountered in performing the audit — Fraud or illegal acts Once the final review of working papers and financial statements are completed — a process that actually starts while the fieldwork is in process — our opinion, the financial statements, and management letter will be issued.