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I I4. Specific Audit Approach (Continued) Understanding Internal Controls I Analytical Procedures The internal control segment is the foundation Auditing Standards on Analytical Procedures for the entire audit and involves an extensive provides guidance on the use and extent of understanding and evaluation of the City's I analytical procedures in all audits. Analytical operating and management information procedures are required in the planning and systems and all related internal controls. The overall review stages of the audit, and are used results of this evaluation will influence the I in the following areas: nature, timing and extent of our substantive audit procedures. This approach ensures that Audit Planning we achieve maximum efficiency and provides valuable feedback to management regarding I Analytical procedures can provide great insight the effectiveness of controls being relied upon in planning an audit. These analyses can throughout the year. enhance our understanding of the City's I transactions and events that may have occurred during the year under audit. A thorough understanding of the internal control structure of an organization is critical in planning our audit procedures and providing We compare the current balances to the prior useful comments and recommendations to the I year and to the current budget. Isolating City. GLSC utilizes a standardized control significant differences can identify areas that overview document which assists us in may require additional attention during the field identifying key elements within internal control, I work. For example, such a review could identify a new revenue source for which we such as the entity's risk assessment process, the control environment, information and would need to obtain documentation supporting communication systems, and general the authority for collecting such monies. monitoring and control activities. ISubstantive Tests Subsequently, for significant internal control structure categories, we will obtain an I Analytical procedures can be used as effective understanding of the design of relevant policies substantive tests in certain circumstances, for and procedures, determine whether such example, testing certain payroll related procedures have been placed in operation and expenditures, such as payroll taxes, which are assess control risk. This review begins by I a specific percent of wages. holding interviews with data processing and accounting personnel and evaluating your Overall Review internal system and accounting documentation. We will then prepare documentation of the I Analytical procedures used at the conclusion of major systems. To the extent it is available; we the audit are designed to assess the will also use internal control documentation conclusions reached and evaluate the overall currently available. This review is organized Ifinancial statement presentation into major accounting cycles. We have found through our experience that I there are two primary methods to test controls. • Documented controls — Tested by reviewing a sample of transactions for I evidence that the control was being performed. • Undocumented controls — Tested through inquiry and observation procedures with appropriate department personnel. IPROPOSAL GLSC&COMPANY, PLLC RFP # 15-12-01 Irtq. d p•blic acre nnnnn,, Page 12