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II II I I I, I I I I I I II 'I I I I I ~ ~ f/@@IJiJJJilO(s&1/J (jJ[j@[fJ@@@[j (Continued) Specific Audit Approach (Continued) SAMPLE SIZE AND STATISTICAL SAMPLING Our professionals will utilize sampling methodologies designed to ensure effective audit procedures are applied in the most efficient manner. Samplinq Techniques We will utilize representative audit sampling procedures with respect to tests of transactions and tests of controls, where a sample of documentation is to be tested as the principal evidence of a control. During tests of controls, the tests will generally consist of a combination of corroborative inquiry and either observation, examination of documents or re-performance. We will use attribute sampling to test documentary evidence as documentation will be the prime corroborative evidence of identified controls. Statistical and Non-statistical Samplinq Tests of transactions and tests of controls can be performed using either statistically or non-statistically based techniques. Statistical approaches will be based on our calculation of risk factors. If a non-statistical approach is deemed appropriate, we will design our procedures to obtain levels of assurance that we judge to be equivalent to those required when using statistically based techniques. Sample Sizes For tests of controls, sample size will be based on the planned or supported assessed level of control risk and the number of planned or actual deviations expected. For transactions test work, sample size will be a function of population, materiality, and risk factors. USE OF EDP SOFTWARE IN THE PROJECT We are actively committed to using computer-based audit techniques. Our knowledge of information systems (IS) and the use of personal computers yield significant savings in the time required to complete an audit. Today's marketplace provides firms, large and small, national and local, with sophisticated computer-aided audit tools necessary to perform data analysis and report generation. Software products, such as Audit Command Language (ACL) for Windows, are used to analyze data and produce reports. _) ~LSC ~,S~~~~i~~~"~~~~ A client's IS environment influences the nature, timing, and extent of planned auditing procedures. Because most of our clients utilize computerized accounting systems, our professional team is experienced with various IS systems. As computers have become more integral to the financial management system, we have met the challenge by incorporating new audit techniques into the audit process. Staff members are trained on new software and are skilled in a wide variety of computerized applications. Each member possesses their own laptop computer equipped with pertinent audit-related software. We will utilize Prosystem FX for Windows, ACL for Windows, database programs and spreadsheet applications for auditing purposes. An important component of our audit is the review of IS general controls. We understand that the effectiveness of many client control procedures is dependent on reliable computer-generated data which result from proper IS general controls. Therefore, we will analyze these controls to determine the adequacy of the internal control environment. Our IS expertise, combined with extensive auditing and consulting experience means that we understand the technical intricacies of complex information systems in the context of real-world application. Utilizing this expertise we will be able to: evaluate IS general controls within the computer environment; document critical transaction processing systems; identify key processes and controls within these transaction processing systems; evaluate the effectiveness of identified controls; advise the audit team on results of the evaluation and effect on planned audit procedures; design, develop and execute computer-assisted audit techniques using computer audit software packages; assess the internal controls 13