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MSLMOORE STEPH ENS LOVELACE CPAs & ADVISORS Approach to Gain and Document Understanding of the City's Internal Control Structure While our overall audit objective is to perform procedures sufficient to enable us to express an opinion on your financial statements, other primary objectives must be met and appropriately satisfied. Initially, our preliminary audit activities are concentrated on obtaining and documenting our understanding of your control environment (the coordinated methods and measures adopted to safeguard your assets, 1 check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies). In other words, we review the systems in place by which management maintains information, protection, and control. We also focus on any required control functions, which are established to ensure compliance with federal, state, or local laws and regulations that are required and/or unique to your financial operation. Subsequently, we will determine the nature, extent, and timing of the work to be performed and will develop a written audit program documenting specific instructions to be utilized by our auditors during the conduct of the audit. After the formal audit plan is developed, we perform tests of the relevant internal control systems to determine compliance with your prescribed policies, procedures, laws, and regulations, as applicable. Our procedures are also specifically designed to incorporate the requirements of the Single Audit Act of 1996,OMB Circular A-133, as amended, and the Rules of the Auditor General, as applicable. To assist us in identifying specific areas subject to audit testing, we will use practice aids developed by 1 the FICPA (Compliance Auditing in Florida), the Office of Management and Budget (Compliance Supplement for Single Audits of State and Local Governments), along with information obtained from reviewing applicable Florida Statutes. 1 Typically, we will test for compliance with applicable laws and regulations simultaneously with testing for compliance with specific internal control systems to efficiently detect all potential problems in advance of our detailed testing procedures. These procedures are initially employed to assess the risk of relying on existing internal control systems and related procedures to determine the extent of substantive testing done after the balance sheet date. Additional procedures are generally limited to testing for compliance with specific and general conditions associated with any federal and/or state financial assistance programs to enable us to express assurance on the control systems and program compliance,as applicable. 1 The results of these tests are used to update our documented understanding of your internal control systems and to identify specific areas of your overall control environment that require additional audit attention. It is also our policy to communicate the results of our compliance testing to management on a timely basis so that corrective actions can be implemented, if necessary, prior to the end of the audit. Approach to be Taken in Determining Laws and Regulations that will be Subject to Audit Test Work A key component in auditing any governmental entity is to determine those laws, regulations, and contracts that have a significant impact on the financial statements. Our audit approach in this area involves: • Review of enabling legislation • Review of federal and state laws • Review of prior financial statements • Review of grant agreements 1 • Inquiry of management and staff • Review of contracts and other agreements • CRA Compliance H-!11t ic viH ;l �Qr 33� 1