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l ~ ~ ~ ~ ~ t t . o SUNNY clSLES u BEACH MANAGEMENT LETTERS Rachlin will prepare a management letter for the City to identify systemic deficiencies observed. The letter also may offer recommendations for changes in accounting and other procedures in order to improve the audit process. As each potential management letter point is identified in the audit process, the engagement team will document the condition, our recommendation and the benefits of the recommended action. All potential comments will be reviewed with the Director of Finance. Rachlin's policy is to prepare this report as a vehicle for suggesting improvements to enhance efficiency, management effectiveness and the degree of internal control. (See Appendix B for three management letters) INFORMATION TECHNOLOGY AUDIT TECHNIQUES In accordance with SAS No. 94, we are required to gain an understanding of the procedures, both automated and manual, by which transactions are initiated, recorded, processed and reported, from their occurrence to their inclusion in the financial statements. During the planning stage of our audit, we evaluate the effect information technology (IT) will have in performing our audit procedures. This evaluation includes obtaining an understanding (generally through observations and inquiries of IT personnel) of the client's internal controls and identifying those controls that are automated. When key internal controls are automated, we use our IT specialist to perform a detailed review of those automated controls. Our IT specialist will then communicate to the audit engagement team as to whether such controls are working as prescribed by management. With this information, the audit engagement team determines the extent of their audit procedures. Rachlin~~ Accountants . Advisors '-'_.C"--""'- - In client situations where there is significant accounting data processed electronically, we use a program called Audit Command Language (ACL). ACL is a computer software program used to extract and summarize computerized financial data files. Here are some of the uses of ACL: . Retrieving aged receivables information . Extracting credit balances in accounts receivable reports . Extracting sample items from reports for testing . Merging files for the purposes of extracting information that meets predetermined criteria . Sorting information ACL provides an efficient way for us to extract and test computerized accounting information. With ACL, we audit through the computer, rather than around the computer. CURRENT TECHNICAL DEVELOPMENTS The firm is committed to year-round communication with all of our clients to discuss the challenges they face, resolution of such challenges, and any issues and concerns of management. In addition, we routinely disseminate newsletters, publications and general correspondence to keep our clients informed of current developments, including GASB and FASB pronouncements. We also conduct our annual Governmental Symposium, which consists of two days of lectures and updates on current developments in governmental accounting and auditing standards, which we invite your staff to attend. Rachlin Cohen & Holtz LLP Proposal for Independent Auditing Services Page - 22