Port of Seattle 
2011 
Engagement Service Plan 

November 1, 2011

Scope of Work 
To form an opinion on the fairness of presentation of the financial
statements of the Port of Seattle for the year ended December 31,
2011 
To consider the effectiveness of the Port's internal control structure
and to examine the Port's compliance related to the requirements of
the Port's major federal awards and the Passenger Facilities Charge
program 
The audits will be performed in accordance with auditing standards
generally accepted in the United States of America and Government
Auditing Standards 


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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 
Issue a management letter of recommendations and observations 
Audit and report on compliance related to the AIP and other Federal Award
Programs, the Schedule of Expenditures of Federal Awards and related
internal control in accordance with Federal Circular OMB A-133 
Audit and report on the schedule of Passenger Facility Charges (PFC's),
receipts and expenditures and related internal controls 
Audit and report on the schedule of net revenue available for revenue bond
debt service 


3

Phases of the Audit 
Planning and risk assessment 
Assessment of internal controls 
Substantive audit procedures 
Reporting and presentation of audit results 


4

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  assessed at high, medium or low 
Inherent risk 
Control risk 
Detection risk 
Audit scope and approach is determined based upon
results of risk assessment 

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Materiality 
The maximum level of misstatement that can be tolerated in the
financial statements without causing a reasonable person's
judgment about them to be significantly changed or influenced 
Determination considerations 
Needs and expectations of readers of financial statements 
Quantitative and qualitative factors 
Major program determination is based on guidance in federal circular 
Level is re-evaluated throughout audit and at conclusion of audit 
Quantitative elements 
Critical components to users of financial statements are analyzed 
A benchmark % is calculated 
Trivial matters threshold is determined for purposes of proposing
adjusting journal entries 

6

Evaluation of Internal Controls 
Internal control is a process designed to provide
reasonable assurance regarding the achievement of
defined objectives 
Effectiveness and efficiency of operations 
Reliability of financial reporting 
Compliance with applicable laws and regulations 
Five components of internal control 
Control Environment 
Risk Assessment 
Control Activities 
Information and Communication 
Monitoring 

7

Our Approach to Internal Control
Testing 
Top-down approach 
Assess entity-level controls and information
technology related (general computer) controls 
Identify significant accounts and processes 
Obtain documentation of significant accounts and
processes 
Assess design and implementation and perform
walkthroughs of significant controls 
Identify "key controls" for testing 
Perform tests of controls and compliance 

8

Significant Accounts and Processes 
Administration of federal awards and related administrative controls 
Billings, cash receipts, and receivables 
Signatory Lease and Operating Agreement and other leases 
Procurement, cash disbursements, and payables 
Payroll 
Capital projects 
Treasury and investments 
Debt and related accounts 
Pollution (environmental) remediation obligation and contingencies 
Third party management 
Financial close and reporting 
Information technology (general computer controls) 
Budget 
9

Information Technology (IT)
Testing Approach 
Determine application systems, databases, and operating systems
in scope based on the business process walkthroughs of our
financial audit team. 
Identify any application controls our financial audit team is planning
to place reliance upon. 
Identify key IT general computing controls that support automated
and application controls to be relied upon by our financial audit
team. 
Conduct walkthroughs of significant application and general
computing controls to assess design and implementation. 
Perform tests of IT controls and compliance 

10

IT Control Areas 
Application Controls 
Procurement 
Billing 
Capital Projects 
Financial Close and Reporting 
General Computing Controls 
Security and Access 
System Acquisition and Implementation 
System Changes 
Computer Operations 

11

Administration of federal awards 
Internal controls and tests of compliance will be
performed relative to the following administrative
requirements 
Allowable costs 
Cash management 
Davis-Bacon Act 
Equipment management 
Matching 
Period of availability 
Procurement 
Real property acquisition 
Reporting 
Subrecipient monitoring 
Special tests and provisions 
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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, actuals to budgeted
amounts and comparison to industry benchmarks 
Analysis of detailed changes within certain accounts such as capital
assets, long term debt and investments 
Predictive analytics for income statement accounts 
Holistic review of overall financial statements 

13

Areas of Audit Effort 
Internal control cycles 
Key controls identified and tested 
Capital assets, payroll, cash disbursements tested via attribute sampling 
All systems tested via inquiry and walkthroughs 
Management estimates 
Environmental remediation obligations, depreciation, allowance for doubtful accounts, grant
receivables, legal claims 
Bond accounts 
Arbitrage liability, capitalized interest, compliance with covenants, new issuances, refunding
or defeasances 
Accounting for leases 
Revenue recognition 
SLOA, other operating revenues, taxes, PFC and federal awards, investment income 
Capital assets 
Net Asset classification 

14

Other 
New accounting and auditing pronouncements 
Timing 
Staffing 
Communications to Audit Committee 



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QUESTIONS? 



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