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MSLMOORE STEPHENS LOVELACE CPAs& ADVISORS 1 Once significant laws and regulations that affect the City have been identified, we will develop compliance testing to ensure that we address these issues. The method utilized to determine the number of samples selected for testing of compliance is directly impacted by our professional judgment, as well as the applicable audit standards. The goal in each case is to ensure compliance with applicable standards in order to obtain sufficient audit evidence to issue not only our audit opinions, but also to issue our required GAGAS report on compliance (Yellow Book Report). Issues that impact this number include the risk associated with any specific compliance item, the number of transactions that are associated with any compliance issue and the controls related to ensuring compliance with the requirement. In order to reduce the burden on staff and to ensure an efficient audit, we will combine our testing for compliance with control and substantive testing procedures whenever possible; also known as dual-purpose testing. Approach to be Taken in Drawing Audit Samples for Purposes of Tests of Compliance Audit sampling is also used extensively in our tests of compliance. We use statistical sampling and perform attribute testing to test both compliance and internal controls over compliance. Examples of compliance areas that we will apply sampling strategies include: > the selection of cash receipts postings to test for determination of compliance with related statutory requirements and utility rate schedules; • the selection of cash disbursements and payroll transactions for compliance testing; > the selection of debt payment transactions to test for timeliness of, and completeness of, payments to paying agents for debt costs and fiscal agent fees; and > the selection of other transactions to determine compliance with laws and regulations. Process to Produce a Meaningful Management Letter Our priority in drafting management letter comments is to get our facts straight. We will meet with management and discuss findings before they are finalized. Any comments made will be thoughtful and accurate. We also do not make frivolous comments that waste the time of management and those in charge of governance. We adhere to the requirements set forth in the applicable audit standards. It is our policy to discuss all potential findings with management in draft form prior to the issuance of our management letter. The purpose of this procedure is to ensure that all pertinent facts and circumstances have been considered. This policy relates to findings required to be reported in accordance with the GAGAS report on internal controls, as well as the management letter required by the Florida Auditor General. We appreciate the importance of this process, and we do not want any surprises when we issue our reports. a We are always available to meet with the City Council to present updates on the audit process and any comments, upon request. Finally, as required by our audit standards, if we determine that communication of any findings is necessary prior to issuance of the audit reports to the City Council, we will communicate them immediately. 1 5, 341