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I I SECTION VI.S - REQUIREMENTS OF THE TECHNICAL PROPOSAL (Colltillued) I 8. SPECIFIC AUDIT APPROACH (COIl/illlled) I MANAGEMENT LETTER (Continued) I Application of this approach to developing our management letter is particularly important given the increasing financial pressures and public scrutiny facing today's public officials. In our experience, no audit finding is complete unless it contains three fully developed areas. These are observations, background, and recommendations. Audit findings are described as an "observation" or "condition", and these conditions are measured against criteria or "what should be". We determine the "background" or the cause for the condition, its effect both in quantitative and qualitative terms. After the determination of the condition, cause and effect, recommendations including solutions when appropriated, are developed for the client to consider in deciding on improvements or corrective action. In our judgment, it is insufficient to make an observation or a problem or a recommendation which simply says "don't do that". Recommendations should full consider who could implement them, how it could be done and when. I I il In Appendix III, we included copies of three recent management letters we issued in connection with our local government audits. I FRAUD I During the course of the audit we will follow the requirements of SAS No. 99, Consideration of Fraud in a Financial Statement Audit. We will gather information needed to identify risk of material misstatement due to fraud by making inquiries of the City's management and employees about fraud or suspicion of fraud, assess the risk after taking into account an evaluation of the City's program and control, and design audit procedures to identify fraud. If any fraud is identified as a result of the inquiries or audit procedures, these will be properly communicated to the appropriate level of management. I I QUALITY CONTROL AND CONFIDENTIALITY I I BKR Garcia participates in an external quality review program requiring an on-site independent examination of our accounting and auditing practice. BKR Garcia and Company has consistently received an unqualified opinion on the quality of our audit practice. During our firm's last external quality control review, seven audits were reviewed, including six government audits. A copy of the report on the firm's most recent quality review is included in Appendix II. I In addition to scheduled Peer Reviews, BKR Garcia continually monitors performance to ensure the highest quality of services. Under the supervision of three audit partners, an audit manager is responsible for monitoring quality control of all appropriate engagements. Only professional staff that works on an engagement has access to client information. It is our policy to obtain from each staff a signed client confidentiality agreement. I I I I J~R~~.:~ 38