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<br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />VI. PROPOSAL REQUIREMENTS <br /> <br />B.PROPQSAL <br /> <br />8. SPECIFIC AUDIT APPROACH (Continued) <br /> <br />g. Approach to be taken in determining laws and regulations that will be <br />subject to audit test work <br /> <br />Statement on Auditing Standards from the American Institute of Certified Public <br />Accountants, establishes standards for testing and reporting on compliance with <br />laws and regulations. In all financial statement audits, the auditor must consider <br />laws and regulations that have a direct and material effect on the financial <br />statements. Further, the auditor designs audit procedures to provide reasonable <br />assurance that the financial statements are free of material misstatements resulting <br />from violations of these laws and regulations that have a direct and material impact <br />on the financial statements. For governmental entities, this requirement is even <br />more important given the variety of legal and contractual considerations typical in <br />the government environment. <br /> <br />Identifying applicable laws and regulations is fundamental to fulfilling the <br />responsibility of understanding their effects. We will obtain this knowledge through <br />the following sources. <br /> <br />Q Discussion of compliance requirements with City officials, including legal <br />counsel. <br /> <br />o Identification of compliance matters in statutes, financial ordinances, City <br />policies, contracts, grants and debt agreements. <br /> <br />o Review of City Council meeting minutes. <br /> <br />Q Inquiries of the program administrator of the governmental entities that provided <br />grants about restrictions, limitations, terms and conditions under which such <br />grants were provided including review of the OMB Circular A-133 Compliance <br />Supplement and the Florida Single Audit Act. <br /> <br />o Our existing knowledge of federal and state laws. <br /> <br />h. Approach to be taken in drawing audit samples for purposes of tests of <br />compliance <br /> <br />Tests of compliance with laws and regulations are included with the tests of <br />transactions and controls, when practical. Additional samples are sometimes <br />necessary to test specific laws and regulations. Sample sizes for compliance <br />testing are determined based on the number of transactions and the significance of <br />the requirement. <br /> <br />'1' ~r?'~i/~d ~;~~~~'~'~:,~ <br /> <br />40 <br />