25D - AGMT - FINANCIAL AUDIT SRVS

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IN erecognizetheim1?ortanceof tIntelyc omple tion o? aucl?it tasks and deHv6rables. Audit approach planning and interim audit work During May of each year, management of our audit team will have an entrance conference with the Director of Finance and Management Services and other appropriate staff. The purpose of this meeting will be to ensure a good working relationship and to discuss the scope and timing of the annual audit, the documents needed for our permanent files, the detailed audit plan, and the list of schedules that City staff normally prepares in connection with the year-end closing. Perhaps the most important objective of the pre-audit conference is to establish a relationship in which we all feel comfortable in asking questions and expressing our views, We devote a considerable amount of time to planning each year, because we find that well- planned audits are completed in a timely manner. We will schedule approximately two weeks of interim audit work each year. During ourfrst year serving the City, we prepared flow charts and other documentation of the internal control structure and of the major systems, such as revenue and cash receipts, purchasing and cash disbursements, payroll and personnel, capital assets, grant compliance, and investment activities. This information was gained through discussions with appropriate City staff, and the review of available documented policies and procedures. Our knowledge of your overall internal control structure and of your major systems was be used to tailored to your specific systems. During the interim work in subsequent years, we have noted changes in the system, if any, a practice, we will continue. At this point we will utilize the prior year financial statements, the current year budget and our knowledge of your systems to determine materiality for audit purposes. This level of materiality will be employed during the final audit work to decide on the extent of testing of year-end account balances. The review of these documents will also assist us in identifying changes from the prior year in the operations of the City. Each year we will select a sample of transactions to determine to what extent the systems are functioning as described to us. The extent of our sample size will depend upon our assessment of your internal control structure. The selection of transactions for testing will be made using a combination of random, systematic and haphazard sampling techniques. We will test the strengths of the systems to be sure they are functioning as intended. We will identify weaknesses, if any, so that they can be included along with our recommendations in our annual management letter. During the interim audit work we will also arrange for typing of confirmations, finalize the schedule for the completion of the final audit work, complete the listing of client prepared schedules, and perform those tasks which can be efficiently accomplished prior to the end of the year. During August each year we will contact you to determine that the year-end closing is well planned. We will also discuss any matters that may impact our audit procedures or your financial reporting. Audit approach-final audit work . The final audit work will begin each year in October with an entrance conference with the Director of Finance and Management Services and other appropriate staff. Fieldwork will begin with an analytical review of revenues and expenditures/expenses. This review will include a comparison of prior year financial statements and current year budget to the year-end trial balance to identify those accounts which will require further audit work based on materiality levels. The primary objective of the final audit work is to audit the final numbers that will appear in the financial statements. Upon completion of fieldwork and posting of any audit adjustments, we will perform a final analytical review of audited balances to determine if our materiality levels have changed as the result of year-end adjustments and to ensure that sufficient test work has been completed. The fieldwork will be completed by late October. Our management review will be completed in the field during the same time period so that at the conclusion of the fieldwork we have agreement on both the format and the content of the various financial reports. An exit conference will be held at the end of fieldwork to summarize the results of the fieldwork and to review significant findings. We suggest meeting with appropriate City staff on a regular basis. This will avoid being disrupted by questions, one at a time. We find that our workday is far more productive when we can plan ahead, and we are sure that well planned days are your most productive also. 26 25D-1 6