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<br />SECTION I.S(C) TECHNICAL PROPOSAL <br /> <br />8: SPECIFIC AUDIT APPROACH (Continued) <br /> <br />c. Sample size and the extent to which statistical sampling is to be used in the <br />engagement (Continued) <br /> <br />Statistical and Non-statistical Samolina <br />Tests of transactions and tests of controls can be performed using either statistically or non- <br />statistically based techniques. Statistical approaches will be based on our calculation of risk <br />factors. If a non-statistical approach is deemed appropriate, we will design our procedures to <br />obtain levels of assurance that we judge to be equivalent to those required when using <br />statistically based techniques. <br /> <br />Samole Sizes <br />For tests of controls, sample size will be based on the planned or supported assessed level of <br />control risk and the number of planned or actual deviations expected. For transactions testwork, <br />sample size will be a function of population, materiality, and risk factors. <br /> <br />d. Extent of use of EDP software in the engagement <br /> <br />We are actively committed to using computer-based audit techniques. Our knowledge of <br />information systems (IS) and the use of personal computers yield significant savings in the time <br />required to complete an audit. Today's marketplace provides firms, large and small, national and <br />local, with sophisticated computer-aided audit tools necessary to perform data analysis and report <br />generation. Software products, such as Audit Command Language (ACL) for Windows, are used <br />to analyze data and produce reports. <br /> <br />A client's IS environment influences the nature, timing, and extent of planned auditing <br />procedures. Because most of our clients utilize computerized accounting systems, our <br />professional team is experienced with various IS systems. As computers have become more <br />integral to the financial management system, we have met the challenge by incorporating new <br />audit techniques into the audit process. Staff members are trained on new software and are <br />skilled in a wide variety of computerized applications. <br /> <br />e. Type and extent of analytical procedures to be used in the engagement <br /> <br />Statement of Auditing Standards on Analytical Procedures provides guidance on the use and <br />extent of analytical procedures in all audits. Analytical procedures are required in the planning <br />and overall review stages of the audit, and are used in the following areas: <br /> <br />Audit Planning <br />Analytical procedures can provide great insight in planning an audit. These analyses can <br />enhance our understanding of transactions and events that may have occurred during the year <br />under audit. <br /> <br />Substantive Tests <br />Analytical procedures can be used as effective substantive tests in certain circumstances, for <br />example, testing certain payroll related expenditures, such as payroll taxes, which are a specific <br />percent of wages. <br /> <br />Overall Review <br />Analytical procedures used at the conclusion of the audit are designed to assess the conclusions <br />reached and evaluate the overall financial statement presentation. <br /> <br />'T'~/~~if~d ~~~~~~~~:ts. <br /> <br />13 <br />