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1 ^ACT MOORE STEPHENS IV!JL LOVELACE CRAB x ADVISORS General Audit Procedures To enable us to reach our conclusion on the fairness of the City's financial statements, we must gather competent, evidential matter that corroborates the assertions made by management in the financial statements. The principal techniques used to acquire evidence on which the expression of our opinion is based are as follows: • Examination (Inspection) - One of our principal objectives is to substantiate the authenticity of various recorded figures and entries. Evidence of such authenticity is typically gathered through examination of documents pertaining to the transaction that occurred. • Confirmation -The process of confirmation is closely related to that of inspection, but is used to obtain supporting evidence by direct request from third parties, rather than by reference to items of evidence readily available from management and staff. • Observation - Observation is commonly used to ascertain compliance with certain prescribed procedures; we frequently use this technique to document and observe your financial operations. • Verification - Generally, all of our activities related to the formulation of an opinion on your financial statements are referred to as verification procedures. However, specific tasks are performed to support specific financial statement assertions regarding the: o accuracy of recorded balances and related account classifications; o valuations of account balances based on generally accepted accounting principles; o cut-off procedures employed by management to consistently record all transactions in the appropriate accounting period(s). • Inquiry - Substantial information is gathered by direct inquiry of your personnel. Through inquiry, we can ascertain the duties performed by given individuals or, through carefully phrased questions, we are able to ascertain if those individuals are properly carrying out the responsibilities assigned to them. We can also ascertain specific information about selected accounting items or transactions to support decisions made by management personnel when other corroborating evidence is not readily available. • Analytical Review- By performing an intensive study through analytical procedures we can gain insight into the manner in which your accounting system does or does not develop reliable a financial information. Our auditors perform analytical review procedures to ascertain that the recorded figures "make sense," by being consistent with each other and with known external changes that are taking place. Changes from the previous year, budget-to-actual results or comparison to other comparable cities (benchmarking), are analyzed to ascertain that the financial information produced through the City's accounting and reporting system(s) are logical and reflect changes in operations or financial position that are known to have occurred. Our audit approach is a positive approach, which maximizes the efficiency and effectiveness of the audit. Our audit programs are "tailor-made" for each engagement to enhance our ability to provide quality, professional services and to produce results that are qualitative in nature. Our specific audit a procedures are principally oriented toward determining the efficacy of the intended internal controls, ascertaining whether they are actually functioning as planned, and testing the final accounting results to determine that they are, in fact, sufficiently reliable and accurate to support the expression of our audit opinion. io 4,4, iSdl - • 23I •