Moss Adams Supp
October 21, 2014 Port of Seattle 2014 Engagement Service Plan AGENDA Moss Adams Service Team Leaders Summary of Services Responsibilities (Auditor / Management) Phases of the Audit Moss Adams Audit Approach Areas of Audit Emphasis Audit Timing Auditing Standards / Accounting Pronouncement Update YOUR 2014 AUDIT SERVICE TEAM LEADERS Team Member Responsibilities Engagement Reviewer - Laurie will serve as your lead client service partner, overseeing all projects we perform for the Port. Laurie Tish, Partner Concurring Reviewer - Jim will serve as the second partner reviewer of the financial statements and our reports and, as necessary, will consult on technical issues or key elements of the audits. Jim Lanzarotta, Partner Additional Reviewer - Kory specializes in audits of governmental entities and employee benefit plans. He will oversee the engagement team and will review testing performed during the audit. Kory Hoggan, Senior Manager YOUR 2014 AUDIT SERVICE TEAM LEADERS Team Member Responsibilities Manager - Tyler will supervise our staff in the field and manage each of the audits we perform for the Tyler Reparuk, Port. Manager Senior - Lisa will spend her time assisting with the supervision of staff in the field and performing procedures related to the financial statement accounts and the OMB A-133 audit. Lisa Dion, Senior Moss Adams Advisory Services Partner - Chris will lead our audit procedures covering the Port's Information Technology (IT) systems, including Chris Kradjan, general computer controls. Partner YOUR 2014 AUDIT SERVICE TEAM LEADERS Team Member Responsibilities IT Consulting Kim will oversee and lead the IT testing procedures, which is a significant part of our audits. Kimberly Koch, Senior Manager IT Consulting - Kevin will serve as an additional reviewer of our IT procedures and will perform audit procedures related to IT security and related Kevin Villanueva, issues. Senior Manager YOUR 2014 AUDIT SERVICE TEAM The following individuals will also serve on the Port of Seattle Engagement Team: o John Witt, Business Assurance Staff o Dan Sievers, Business Assurance Staff o Abby Barr, Business Assurance Staff o Maribelle Clear, IT Senior Consultant o Fiona Deng, Branch Richards & Co; Subcontractor, Business Assurance Staff SCOPE OF WORK SUMMARY OF SERVICES Audit and report on financial statements for both the Enterprise Fund and the Warehousemen's Pension Trust Fund to be included in the Port's Comprehensive Annual Financial Report Audit and report on internal control and compliance over financial reporting in accordance with Government Auditing Standards o Issue a management letter of recommendations and observations, as necessary Audit and report on compliance related to the Airport Improvement Program (AIP) and other Major Federal Award Program(s), the Schedule of Expenditures of Federal Awards and related internal controls in accordance with Federal Circular OMB A-133 Audit and report on the schedule of Passenger Facility Charge (PFC) program receipts and expenditures and related internal controls Audit and report on the schedule of net revenue available for revenue bond debt service OUR RESPONSIBILITIES Ensure the Audit Committee is aware Express an opinion on the Port's of any significant deficiencies or financial statements based on our material weaknesses audit Communicate those matters that Issue GAGAS, Circular A-133, PFC, and have come to our attention as a Schedule of net revenue available for result of the performance of the revenue bond debt service Reports audit Report any non-compliance with Immediately inform management federal and state laws as required by and the Audit Committee about any OMB Circular A-133 information indicating illegal acts /fraud that may have occurred Read other information contained in audited financial statements and Conduct the audit in accordance with consider whether the information is generally accepted auditing materially consistent with the standards (GAAS) and generally information in the financial accepted government auditing statements. standards (GAGAS) MANAGEMENT'S RESPONSIBILITIES Establish and maintain adequate Make accurate and complete records and internal controls financial statement information over financial reporting available to us. Prepare financial statements Make entity personnel available that are materially correct and to us. in compliance with applicable accounting standards Inform us about all known or suspected fraud affecting the Provide written representations entity about management's responsibilities and assertions Identify and ensure compliance prior to issuance of our reports. with laws and regulations applicable to the entity's activities PHASES OF THE AUDIT Planning and risk assessment Assessment and evaluation of internal controls Substantive audit procedures Reporting and presentation of audit results AUDIT TIMELINE Planning & Risk Testing of Testing of IT Substantive Audit Reporting & Assessment Internal Controls Controls Procedures Communications November 2014/ January 2015 April 2015 October 2014 Final review of fieldwork, report issuance, meet and present to Audit Committee September/October 2014 February - March 2015 Final procedures for FS and single audit PLANNING AND RISK ASSESSMENT Audit risk involves the risk of material misstatement in the financial statements Audit is designed to provide reasonable not absolute assurance that the financial statements are free of material misstatements Audit risk model considers different types of risk o Inherent risk o Control risk o Detection risk Audit scope and approach is determined based upon results of risk assessment EVALUATION OF INTERNAL CONTROLS Components of internal control which we evaluate o Control Environment o Risk Assessment o Control Activities o Information and Communication o Monitoring Top-down approach o Assess entity-level controls and information technology related (general computer) controls o Identify significant accounts and processes o Obtain documentation of significant accounts and processes o Assess design and implementation and perform walkthroughs of significant controls o Identify "key controls" for testing o Perform tests of controls and compliance SIGNIFICANT ACCOUNTS AND PROCESSES Administration of federal awards and related administrative controls Billings, cash receipts, and receivables Airport, seaport, real estate lease agreements and other operating leases Procurement, cash disbursements, and payables Payroll Capital assets and projects Treasury and investments Debt and related accounts Environmental remediation liability and contingencies Financial close and reporting Information technology (general computer controls) Budget INFORMATION TECHNOLOGY (IT) TESTING APPROACH Determine application systems, databases, and operating systems in scope Identify areas of risk and key IT general computing controls that support automated and application controls integral to financial accounting and reporting Conduct walkthroughs of significant application and general computing controls to assess design and implementation Perform tests of IT controls and compliance IT CONTROL AREAS Application Controls o Procurement and cash disbursements o Payroll o Billing o Capital assets and projects o Financial close and reporting General Computing Controls o Security and access o System acquisition and implementation o System changes/change management o Computer operations ADMINISTRATION OF FEDERAL AWARDS Internal controls and tests of compliance will be performed relative to the following administrative requirements: Allowable costs and activities Cash management Davis-Bacon Act compliance Equipment and real property management Matching and level of effort Period of availability Procurement and suspension and debarment Program income Reporting Sub-recipient monitoring Special tests and provisions SUBSTANTIVE AUDIT PROCEDURES Tests of Details Directed testing and audit sampling Random and judgmental sampling methods are used Compliance with requirements of the major federal awards and the PFC program Analytical Procedures Comparison of current and prior year results, and actual to budgeted amounts Analysis of detailed changes within certain accounts such as capital assets, long term debt and investments Predictive analytics for income statement accounts, based upon history , data independent of accounting department, and industry expectations Holistic review of overall financial statements AREAS OF AUDIT EMPHASIS Internal control cycles o Key controls identified and tested o Capital assets, payroll, cash disbursements are tested via attribute sampling o All systems tested via inquiry and walkthroughs Management estimates o Environmental remediation liability, depreciation, allowance for doubtful accounts, grant receivables, legal claims Bond accounts o Arbitrage liability, capitalized interest, compliance with covenants, new issuances, refunding or defeasances Accounting for leases Revenue recognition o Airport lease agreement, seaport and real estate leasing arrangements, other operating revenues, taxes, PFC and federal awards, investment income Capital assets Net Position classification Pension Plans and Other Postemployment Benefits o Disclosures and reliance upon calculations performed by specialists GASB DOESN'T REST, WHY SHOULD YOU? Accounting Pronouncements in the Works: OPEB Plans o Similar to pensions noted earlier will require more liability to be reflected in the financial statements Fair Value Measurement o Will consider if appropriate to change reporting for certain investments at fair value instead of cost GAAP Hierarchy o Review of the hierarchy levels and assessment of the standard-setting process. Lease Accounting o Reexamine issues related to lease accounting, determination of whether leases meet the definition of assets or liabilities. Financial Account Reporting Model o Reexamination of Statements 34, 35, 37, 41, and 46 ACCOUNTING PRONOUNCEMENTS (GASB) GASB 67 - Financial Reporting for Pension Plans an amendment to GASB Statement No. 25 (effective Fiscal Year 2014) GASB 68 - Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 (effective Fiscal Year 2015) GASB 69 - Government Combinations and Disposals of Government Operations (effective Fiscal Year 2014) GASB 70 - Accounting and Financial Reporting for Nonexchange Financial Guarantees (effective Fiscal Year 2014) GASB 71 - Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (effective Fiscal Year 2015) OMB GRANT REFORM Streamlines the Federal guidance on Administrative Requirements, Cost Principles, & Audit requirements for Federal awards o Limits allowable costs, provides consistent and transparent treatment of costs o Eliminates duplicative and conflicting guidance, o Targets audit requirements on risk of waste, fraud, and abuse o Focuses on performance rather than just compliance Audit requirements o More emphasis on risk and audit threshold increases from $500K to $750K Effective for the Port in fiscal year 2015 CONTACT INFORMATION: LAURIE TISH, LAURIE.TISH@MOSSADAMS.COM, 206.302-6466 KORY HOGGAN, KORY.HOGGAN@MOSSADAMS.COM, 206.302-6404 TYLER REPARUK, TYLER.REPARUK@MOSSADAMS.COM. 206.302-6431 CHRIS KRADJAN, CHRIS.KRADJAN@MOSSADAMS.COM. 206.302-6511 KEVIN VILLANUEVA, KEVIN.VILLANUEVA@MOSSADAMS.COM, 206.302-6542 Questions? The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought.
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