SCMTD February 2004 Board of Directors Agendas - Santa Cruz ...

Understanding the District’s Internal Control Structure
Santa Cruz Metropolitan Transit District
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We use inquiry, both written and oral, to document our understanding of the District’s internal
control structure. We then test our understanding with compliance auditing, sometimes called
tests of transactions.
Approach to Determine Applicable Laws and Regulations Subject to Audit Test Work
Our experience with various transit agencies and municipal audit clients, most with federal or
state monies, has created a reservoir of knowledge of many laws and regulations. However, by
inquiry and observation, we will determine all major programs (over S300,OOO annually)
participated in by the District. We then consult the actual law, the Federal Register, Catalogue of
Federal programs, or the California State Controllers guide to State and Federal Compliance to
obtain understanding of the requirements of the law. For major programs, we specifically test
those requirements by inspection of documents. However, based on our prior experience with,
transit agencies, we will probably identify the District’s federal capital grant as a major program.
Approach for Drawing Audit Samples for Compliance Tests
Compliance test samples will be drawn usually by statistical sampling techniques. The universe
from which the sample is drawn begins at the beginning of the year under audit, and ends with
the end of that year. If a null is picked, it is replaced in draw sequence until sufficient live items
comprise the planned sample size.
We use Excel to draw audit samples. We will need the District to provide us with all
disbursements and payroll data files for the year in D-BASE or OBDC format fi-om which to
draw our samples.
BROWN ARMSTRONG
ACCOUNTANCY CORPORATION 16
Providing Accounting and Auditing Service
for more than 29 yea]