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Audit Sampling: Grau uses a nonstatistical approach to sampling and follows the guidance of the AICPA on the use of sampling in governmental audit engagements. In applying these AIPCA pronouncements, we would first consider the effectiveness of alternative approaches before concluding that sampling is necessary. Audit sampling may not always be appropriate as it may be more efficient to apply analytical procedures to test an account balance or class of transactions. Our professional judgment will be used to determine what areas sampling is deemed appropriate and includes assessing inherent risk, control risk, and combined audit risk. Audit areas that may involve the use of sampling include: • Substantive tests of balance sheet accounts • Substantive test of details of transactions • Tests of controls, which may be done as a "dual-purpose test" utilizing the same sample as test of details of transactions • Tests of compliance with laws and regulations • Single audit compliance testing for each major program Sample Size: Our sample size will vary depending on whether we are testing for compliance or substantive testing and the size of the population being examined. If a firm states a specific number of items they will examine for their sample size, they are not utilizing professional judgment. Determination of the sample size should be dependent on quantitative and qualitative factors such as; number of transactions, type of transaction, expectation of how well controls work, results from preliminary risk assessment and whether a sample will be used for substantive procedures. After these factors are taken into account then a sample size determination should be made. The results of our testing will be integrated into the other audit procedures performed to enhance audit efficiency and identify any additional risk factors. Extent of use of electronic data processing (EDP) software in the engagement Automated Workpapers Our firm utilizes ProSystem fx Engagement electronic software, which allows us to conduct a true paperless audit. Communications We emphasize a continuous, year-round dialogue between the City and our management team. We regularly Grau is committed to advancing the communicate through personal telephone calls and electronic efficiency of our audits through the latest mail throughout the audit and on a regular basis. Our clients computer technology. We are continuously are able to transmit information to us on our secure client making substantial investments in computer hardware, software and auditor training that portal with the ability to assign different staff with separate log will increasingly benefit our clients by on and viewing capability. This further facilitates efficiency as reducing clerical interruption time on our all assigned users receive electronic mail notification as soon engagements. as new information has been posted into the portal. Accounting Research We utilize Checkpoint, by Thompson Reuters which is comprehensive online database providing leading industry guidance on analytical accounting and auditing. It includes full publications from the Governmental The control environment over Accounting Standards Board, the Financial Accounting Standards Board, information technology including Emerging Issues Task Force, GAO, AICPA and International Accounting the IT organization structure, Standards Board. In addition, Checkpoint provides intelligent links to the Posideredlicies andthe procedurescoerstone an forall original source documents. conrn g other general controls because it sets the tone for the IT function Computer-Assisted Audit Techniques (CAAT)'s within an organization. It is our firm's policy to design our audit procedures to maximize the application of computer-assisted audit procedures (CAAP) in order to 17