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SPECIFIC AUDIT APPROACH (continued) In the planning stage, analytical proced�u��used��ndi��.��audit risk, and to determine the nature, timing, and extentof planned substantive testing. Material revenues, expenditures,andbelanoeaheeta000unts are compared to the current years budget and/or prior year actual amounts to identify accounts that vary significantly from expectations. In this phase of the audit, analytical review is typically done at an aggregated level, unless specific variances are considered to warrant further investigation. In the planning stage of the audit, we use data mining software to provide advanced data analytics. This software is used to query, oummehze, and categorize data. MMKR uses this tool in agovemme�e| audit to Iocate duplicate or missing items, journalentriesthat are not balance, journal entries made to unusua accounts or categories, transactions posted on odd dates, and variety of other tasks. Analytical procedures are a key tool used in the substantive testing phase of all significant audit areas. In this phase of the auditanalytical procedures are apphedtoindividually o\gn�oantaccounts. Some ofthe most common types of analytical tests employed include: comparison to current year budget and/or prior year actual amounts; analysis of significantratios; comparison to available industry -wide data; and reasonableness tests where actual results are compared toexpected results that are based on other known financial or nonfinancial variables related to the account being analyzed. In the final review state of the audit, these same types of analytical procedures are applied to the final trial balance and the draft financial statements. The purpose of applying analytical procedures at this stage is to assist in assessing the conclusions reached during the audit and the adequacy of the audit evidence gathered. They are also used to evaluate the overall financial statement presentation. At MMKR�ee|aoinoorpnteanalytical comparisons inour management repo�.VVebelieve that providing historical trend �renddata and comparisons tostate-wide averages enhances the perspective ofthe reader for interpreting their own financial results. E. Approach to be Taken to Gain and Document an Understanding of the City's Internal Control MMKR first gains an understanding of the internal control through interviews with the specific employees of the City that work in each funotion, including a review and analysis of written accounting policies and procedures ofthe City The understanding for each function is documented through the use of question and answer checklists and in written narrative form. This understanding is then confirmed through transaction testing, walkthrough observations, inquiry, observation, or other audit procedures. F. Approach to be Taken in Determining Laws and Regulations That Will be Subject to Audit Test Work All federal programs used in the City will be identified through inquiries of program and finance personnel and reviewing the state aid confirmation (for federal programs for which the state of Minnesota serves as a pass-through agency). Federal Program Compliance Supplement requirements will be identified as necessary. The Minnesota Legal Compliance Audit Manual will also be used to determine laws and regulations that will be subject to audit test workBeyond that, MMKR utilizes numerous other resources such as regular withoommunioetion applicable federal and state oversight agencies and regulatory bodies, professional education, active participation in relevant professional orgonizationo, an extensive and up-to-date |ibrery, and our experience inworking with Minnesota cities toensure that all applicable laws and regulations are addressed by our audit procedures.