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I I SECTION III - SPECIFIC AUDIT APPROACH I 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 substantive testwork, sample size will be a function of population, materiality, and risk factors. I Experience In Information Systems And Technology and Extent of Use of EDP Software in the Engagement I Our approach to auditing integrates traditional auditing techniques with a total system concept. We are actively committed to using computer-based audit techniques. Our knowledge of information systems (IS) and the use of paperless audit software yield significant savings in the time required to complete an audit. I 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. 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. I 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. I 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. I Our IS expertise, combined with extensive auditing and consulting experience mean that we understand the technical intricacies of complex information systems in the context of real-world application. I Utilizing this expertise we will be able to: I .:. 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 I Analytical Procedures I Statement of Auditing Standards on Analytical Procedures, provides guidance on the use and extent of analytical procedures in all audits. I Analytical procedures are required in the planning and overall review stages of the audit, and are used in the following areas: I Audit Planning Analytical procedures can provide great insight in planning an audit. These analyses can enhance our understanding of the City's transactions and events that may have occurred during the year under audit. We compare the current balances to the prior year and to the current budget. Isolating significant differences can identify areas that may require additional attention during the field work. For example, such a review could identify a new revenue source for which we would need to obtain documentation supporting the City for collecting such monies. I I Substantive Tests Analytical procedures can be used as effective substantive tests in certain circumstances, for example, testing certain payroll related expenditures, such as payroll taxes, which are a specific percent of wages. I I 18