Presentation to Audit Committee Moss

Port of Seattle
2009
Engagement Service Plan

December 1, 2009

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,
2009
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


2

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

5

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
Procurement, cash disbursements, and payables
Payroll
Capital projects
Treasury and Investments
Debt and related accounts
Pollution remediation obligation and contingencies
Third party management
Financial close and reporting
Information technology (general computer controls)
Budget
9

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
Special tests and provisions

10

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

11

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
Pollution 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

12

Other
New accounting pronouncements
Timing
Staffing
Communications to audit committee



13

QUESTIONS?



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