HomeMy WebLinkAboutCORRESPONDENCE - RFP - P953 AUDITING SERVICES (4)A final phase of control evaluation is the identification of the policies and procedures
management has established to provide reasonable assurance that financial records
are accurate and assets are safeguarded. The existence and effectiveness of controls
is a very important factor in designing audit tests to uncover material financial
misstatements.
PR g. There are many contracts, laws and regulations for which the MPO's auditor is
responsible for testing compliance with. Most of these are financial in nature. The
auditor does not have detection responsibility for general laws and regulations, such
as civil rights statutes or environmental regulations.
Our approach to this testing is to review the primary contracts, laws, and regulations
applicable to the MPO, and determine which could directly affect the financial
statements if noncompliance occurred. We then test these provisions in proportion to
the likelihood and impact of noncompliance. The major potential source for laws
affecting intergovernmental entities is the Colorado Revised Statutes. Remaining
sources of laws and regulations include the MPO's policies, (e.g. purchasing and
investment regulations), the provisions of federal grants, and others, such as arbitrage
and continuing disclosure.
h. This section will discuss the approach to be taken in drawing audit samples for tests
of compliance. Control/compliance tests will be primarily performed in the areas of
purchasing, disbursements and payroll. Purchasing transactions will be selected from
the range of check numbers issued during the year. Those checks selected will be
tested in detail for purchase approval, receipt of goods, approval of invoice,
purchasing policies, and compliance with contracts, if applicable.
Payroll transactions will be selected from the range of payroll checks or direct deposit
advices issued during the year. These will be tested for accuracy, pay rates, contract
or timesheet, approval, payroll deductions, and legal requirements (W-4, I-9, etc.).
Some types of laws, regulations, and contracts can be tested without selecting
additional audit samples. For example, the purchasing policies of the MPO will be
tested in conjunction with the test of controls over expenditures. Compliance with
grants and contracts can best be determined in the audit by reviewing these
documents to determine if any provisions would apply to transactions of the period.
Identifiication of Anticipated Potential Audit Problems
We are not aware of any anticipated audit problems regarding the 2004 audit of the MPO. Of
course, there are always unexpected circumstances, different kinds of transactions, and changes
in accounting standards that come up during the performance of an audit.
Our method of dealing with these factors is to identify them as soon as possible and to
immediately communicate with MPO officials to determine what efforts will be necessary to
work through the situation. Typically, extra efforts are required of both the audit firm and the
MPO staff.
The professional attitude of the MPO staff, as well as our considerable audit experience,
has given us an excellent track record in resolving unanticipated difficulties.
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