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a • •• City Of rd• 54! Sunny �® a • Phase I: Strategic Planning • Relative significance of the account to the financial A thorough understanding of the City and its statements as a whole • operating environment is essential for developing an • Volume of transactions • efficient, cost-effective audit plan. During this phase, the • Susceptibility of the account to fraud • engagement partner and key supervisory personnel will • Accounts that have traditionally required significant meet with the appropriate personnel to update an under- adjustments • standing of operations. You will also have the opportunity • Account with complex calculations, judgment, and • to express your expectations regarding the services that accounting issues that have a high assessed level we will provide. This effort will be coordinated so that of inherent risk • there will be minimal disruption to your staff. During this Based on these considerations, we assess the • phase we will perform the following activities: inherent risk and control risk to determine the overall • • Review the current regulatory and statutory audit risk. Once this assessment is completed, the audit • compliance requirements within which the entity procedures to be used are determined. By redirecting operates. This will include a review of applicable our efforts through a risk-based approach, audits are • federal and state regulations; ordinances, bond significantly enhanced, which provide greater value • covenants, contracts, and other agreements; to our clients. ® meeting minutes of the City Commission. The Firm will use several approaches to conduct • Review major sources of information such as the audit engagement. These approaches include • budgets, organization charts, procedures manuals, traditional audit techniques and strategies, and an ® financial systems and management information evaluation of the systems utilized by the City. systems. • • Determine the most practical and effective way to Specific Fraud Investigative Techniques • apply computer-aided audit tools to convert and Professional Auditing Standards imposes on auditors analyze data and generate reports. the additional responsibility to "plan and perform the • • Review internal control systems, including audit to obtain reasonable assurance about whether the • determining an audit risk assessment. financial statements are free of material misstatements • • Consider the methods used to process accounting due to fraud." information that influence the design of the internal By redirecting our efforts through a risk-based • control system. This includes understanding the approach and additional fraud inquiry techniques, • design of relevant policies, procedures, and records audits are significantly enhanced. and whether they have been placed in operation. • • Design audit programs to ensure that they Phase II: Execution of Audit Plan • incorporate financial statement assertions, specific The audit team will complete a major portion of audit objectives and appropriate audit procedures transaction testing and audit requirements during this • to achieve the specified objectives. phase. The procedures performed during this period will • • Identify and resolve accounting, auditing and enable us to identify any matters that may impact the • reporting matters. completion of our audit work or require the attention of • Prepare detailed audit plans, including a list of management. Tasks to be performed in Phase II • schedules to be prepared by the City personnel. include, but are not limited to: • • Apply analytical procedures to assist in planning Risk-Based Audit Technologies the nature, timing and extent of auditing procedures • The Firm employs a risk-based approach early in used to obtain evidential matter for specific account • the audit process. This approach considers how the balances or transaction classes. Analytical • overall risk identified in the general risk analysis affects procedures are utilized in almost every audit specific account balances. We consider, in part: area tested. • • ® n n Q��I '^ ^ Proposal for Professional Auditing Services ACCOUNTANTS. ADVISORS www.marcumllp.com a Page 33 • 1215079F 0