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oSUNNY clSLES u BEACH AUDIT PROCESS The audit will be conducted four phases. Phase I: Strategic Planning A thorough understanding of your organization and its operating environment is essential for developing an efficient, cost-effective audit plan. During this phase, the engagement partner and key supervisory personnel will meet with the appropriate personnel to update our understanding of operations. You also have the opportunity to express your expectations regarding the services that we will provide. This effort will be coordinated so that there will be minimal disruption to your staff. During this phase we will perform the following activities: . Review the current regulatory and statutory compliance requirements within which the City operates. This will include a review of applicable federal, state and county rules and regulations; ordinances, bond covenants, contracts, and other agreements; and meeting minutes of the City Commission. · Review major sources of information such as budgets, organization charts, procedures manuals, financial systems and management information systems. . Determine the most practical and effective way to apply computer-aided audit tools to convert and analyze data and generate reports. . Review internal control systems, including making an audit risk assessment. . Consider the methods used to process accounting information that influence the design of the internal control system. This includes understanding the design of relevant policies, procedures, and records and whether they have been placed in operation. . Design audit programs to ensure that they incorporate financial statement assertions, specific audit objectives and appropriate audit procedures to achieve the specified objectives. · Identify and resolve accounting, auditing and reporting matters. . Prepare detailed audit plans, including a list of schedules to be prepared by City personnel. Phase II: Execution of Audit Plan The audit team will complete a major portion of transaction testing and audit requirements during this phase. The procedures performed during this period will enable us to identify any matters that may impact the completion of our audit work or require the attention of management. Tasks to be performed in Phase II include, but are not limited to: . Apply analytical procedures to assist in planning the nature, timing and extent of auditing procedures used to obtain evidential matter for specific account balances or transaction classes. · Perform substantive account balance and transaction tests. Statistical samples will be drawn from major transaction systems, including cash disbursements, cash receipts, accounts payable and payroll. The size of the samples will be determined after the review of the internal control system. There are four types of tests that involve audit sampling: Account Balance Tests Substantive tests of account balances are performed on year-end balances. Certain accounts justify a 100 percent examination, such as confirming a bank balance, which does not involve sampling at all. R hi- when Rachlin Cohen & Holtz LLP ac In&?l:loltz Proposal for Independent Auditing Services Accountants . Advisors Page - 20