Describe substantive procedures the auditor should perform to obtain

sufficient and appropriate audit evidence in relation to:-

- Trade payables
- Employment tax payable
- Sales tax payable

Trade payables

Substantive Procedures – 11 1 By:- Haris Hanif

Answer:-
- Agree the opening trade payable balance with the last year’s closing
balance to ensure correct value is carried down.

- Compare trade payables with the prior years and industry averages and
discuss with the management and investigate the significant variations.

- Calculate trade payable days and compare over the past years and
industry averages and investigate the significant difference.

- Review the post year-end payments and follow in the pre-year-end

payable balance to ensure the correct valuation at year-end.

- Agree the payable balance with the statements sent by the suppliers.

- With the permission of client, send the positive confirmation letter to

the suppliers to confirm the year end payable balance.

- For any payments made during the year, agree the amounts from the
cash book/bank statements.

- Agree the closing trade payable balance in the ledger, trial balance, draft
financial statements to ensure completeness of records.

- Recalculate the entire payable list/ledgers to verify the mathematical

accuracy of figures.

- Review the adequacy of disclosures in the notes related to the trade

payables.

Substantive Procedures – 11 2 By:- Haris Hanif

Employment tax payable

Substantive Procedures – 11 3 By:- Haris Hanif

Answer:-
- Perform analytical procedures by comparing the employment tax
payable over the previous years and investigate unusual difference for
reasonableness test.

- Obtain the employment tax calculations records to ensure that tax was
deducted as per the current active tax rates/slabs.

- Agree the year-end employment tax payable accrual with payroll records
to verify the accurate amount recorded.

- Recalculate the employment tax to verify the mathematical accuracy of

the figures.

- Agree the amount paid to the tax authorities in the post-year-end bank
statement.

- Review the correspondence with the tax authorities for any amounts
outstanding, if yes, then verify in the year-end accrual.

- Inspect and read the notes to verify the complete disclosures of

employment tax.

Substantive Procedures – 11 4 By:- Haris Hanif

Sales tax payable

Substantive Procedures – 11 5 By:- Haris Hanif

Answer:-
- Obtain the sales invoices sent to the customers and ensure that sales tax
was charged as per the active rate in the current year.

- Perform the analytical procedures by comparing the sales tax with the
previous years and investigate the significant variations for
reasonableness test.

- Inspect the liability record to ensure that sales tax liability is accounted
for as current liability to test the classification.

- Agree the sales tax paid in the post year end bank statement.

- Review the correspondence with the tax authorities for any amounts
outstanding, if yes, then verify in the year-end accrual.

- Recalculate the sales tax liability to verify the mathematical accuracy.

- Agree the year-end sales tax liability to the tax return submitted to the
sales tax authority to verify the accurate amount.

- Review the notes to the accounts to verify the complete disclosures of

the sales tax liability.

Substantive Procedures – 11 6 By:- Haris Hanif