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Equity <br />Determine whether FICA taxes are being accrued on the year- <br />end balance. <br />Rollforward compensated absences liability by obtaining either <br />the accrual for amounts earned or the amounts used/paid for <br />disclosure in the notes to the financial statements. <br />Consider the appropriateness of the expense allocation for the <br />change in compensated absences of governmental activities. <br />Inquire about an estimated current portion and consider <br />whether this is being presented appropriately in the financial <br />statements. Compare current portion to actual uses/payments <br />for reasonableness. <br />Inquire about the existence of any severance agreements or <br />termination benefits. Obtain supporting documentation and <br />test accordingly. <br />Compare beginning equity by fund to the prior year audit, and <br />investigate any differences. <br />Review fund balance classifications based on the nature of the <br />funds and board resolutions/policies (if applicable). <br />Review net asset classifications for accuracy. Recalculate net <br />assets invested in capital assets net of related debt. <br />These substantive procedures will be completed primarily by our staff auditors. Each workpaper will <br />be reviewed by the engagement manager (and where appropriate, the engagement principal) during <br />fieldwork so questions can be resolved while the team is still on-site. <br />Phase 3: Financial Statement Review <br />Financial Statement Review - Another key element of the fieldwork process is the review of draft <br />financial statements (including footnotes), and the preparation of the independent auditors' report, <br />management letter, and other applicable reports/correspondence. The following are the primary steps <br />in the preparation of the financial statements: <br />Procedure <br />Footnotes <br />SAS 114 letter <br />Description <br />Draft notes to financial statements using a current disclosure <br />checklist to ensure completeness. <br />Obtain supporting documentation for disclosures not directly <br />linked to the trial balance or financial statements, such as: <br />retirement and other postemployment benefit plan funding <br />progress and funded status, related party transactions, <br />subsequent events, etc. <br />Through the audit process, the engagement team will keep a <br />list of potential audit issues and/or internal control or <br />efficiency recommendations. <br />— Near completion of fieldwork, the potential items are reviewed <br />and discussed amongst the audit team. <br />