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During the internal control phase, we will also perform a review of general and application information <br />services/information technology (IS/IT) controls for applications significant to financial statements to conclude <br />whether IS general controls are properly designed and operating effectively. <br />Based on our preliminary review, we will perform an initial risk assessment of each critical element in each <br />general control category, as well as an overall assessment of each control category. We will then assess the <br />significant computer -related controls. <br />For IS/IT-related controls we deem to be ineffectively designed or not operating as intended, we will gather <br />sufficient evidence to support findings and will provide recommendations for improvement. For IS controls we <br />deem to be effectively designed, we will perform testing to determine if they are operating as intended through <br />a combination of procedures, including observation, inquiry, inspection, and re -performance. <br />Phase 3: Testing and analysis <br />The extent of our substantive testing will be based on results of our internal control tests. Audit sampling will be <br />used only in those situations where it is the most effective method of testing. <br />After identifying individually significant or unusual items, we will decide the audit approach for the remaining <br />balance of items by considering tolerable error and audit risk. This may include (1) testing a sample of the <br />remaining balance; (2) lowering the previously determined threshold for individually significant items to increase <br />the percent of coverage of the account balance; or (3) applying analytical procedures to the remaining balance. <br />When we elect to sample balances, we will use TeamMate to efficiently control and select our samples. <br />Our workpapers during this phase will clearly document our work as outlined in our audit programs. We will <br />provide the City with status reports and be in constant communication with the City to determine that all <br />identified issues are resolved in a timely manner. We will hold a final exit conference with the City to summarize <br />the results of our fieldwork and review significant findings. <br />Phase 4: Reporting and follow up <br />Reports to management will include oral and/or written reports regarding: <br />• Independent Auditors' Report <br />• Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other <br />Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing <br />Standards <br />• Independent Auditors' Report on Compliance for Each Major Federal Program, Report on Internal Control <br />Over Compliance, and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform <br />Guidance <br />• Management Letter <br />• Written Communication to Those Charged with Governance, which includes the following areas: <br />o Our responsibility under auditing standards generally accepted in the United States of America <br />o Changes in significant accounting policies or their application <br />o Unusual transactions <br />o Management judgments and accounting estimates <br />o Significant audit adjustments <br />o Other information in documents containing the audited financial statements <br />o Disagreements with the City <br />o The City's consultations with other accountants <br />City of Santa Ana RFP No. 24-009 Page 34 of 63 <br />