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I I I I I I I I I I I I I I I I I I I Vl~ PRQPQIAL REQUI~EaMENT$ g~PRQPQIAL, 8. SPECIFIC AUDIT APPROACH (Continued) f. Approach to be taken to gain and document an understanding of the City of Sunny Isles Beach internal control structure The internal control segment is the foundation for the entire audit and involves an extensive understanding and evaluation of City operating and management information systems and all related internal controls. The results of this evaluation will influence the nature, timing and extent of our substantive audit procedures. This approach ensures that we achieve maximum efficiency and provides valuable feedback to management regarding the effectiveness of controls being relied upon throughout the year. A thorough understanding of the internal control structure of an organization is critical in planning our audit procedures and providing useful comments and recommendations to City. Grau utilizes a standardized control overview document which assists us in identifying key elements within internal control, such as the entity's risk assessment process, the control environment, information and communication systems, and general monitoring and control activities. Our evaluation of internal control includes considering the individual components noted above and then considering the effectiveness of internal control as a whole. We will obtain our understanding of each of the elements through the following procedures: · Meeting with City personnel to discuss operations; and · Reviewing internal assessment of internal control Once we have obtained an understanding of the design of relevant policies and procedures, we will determine whether such procedures have been placed in operation and assess control risk. This begins by holding interviews with data processing and accounting personnel and evaluating your internal system and accounting documentation. We will then prepare documentation of the major systems. To the extent it is available we will also use internal control documentation currently available. This review is organized into major accounting cycles. We have found through our experience that there are two primary methods to test controls. · Documented controls - Tested by reviewing a sample of transactions for evidence that the control was being performed. · Undocumented controls - Tested through inquiry and observation procedures with appropriate department personnel. ,r; ~r~~if~' ~;~~~~,~,~,~~ 39