Describe substantive procedures the auditor should perform to obtain

sufficient and appropriate audit evidence in relation to:-

- Accrued expenses
- Accrued Wages

Accrued expenses

Substantive Procedures – 12 1 By:- Haris Hanif

Answer:-
- Obtain the list of all accrued expenses and confirm the items related to
the business norms/activities and ensure items are related to revenue
expenditures.

- Compare accrued expenses over the past years and discuss with the
management and investigate the significant variations.

- For actual accrued expense, agree the amounts from the invoices issued
by the suppliers.

- For accrued expenses estimated, discuss with the management the basis
of estimations and ensure the assumptions are reasonable and can be
relied upon and also analyse the variation level from the prior years to
ascertain reliability of estimated accrual.

- Recalculate all the accrued expenses to verify the mathematical accuracy

of figures.

- Agree the accrued expenses in the profit/loss as expense charged and

payable as at year-end.

- Review post year end payments and follow in the pre-year-end accruals
to verify the valuation.

- Review the adequacy of disclosures related to accrued expenses in the

notes to the accounts.

Substantive Procedures – 12 2 By:- Haris Hanif

Accrued Wages

Substantive Procedures – 12 3 By:- Haris Hanif

Answer:-
- Obtain the total payroll expenses and compare with the prior years and
investigate the significant variations.

- Perform proof-in-total calculations by multiplying average number of

employees with average wage rate and compare with the payroll
expense actually charged and investigate the significant variations.

- Obtain the payroll calculations and ensure appropriate and valid

statutory deductions were made, like employment tax as per active tax
rate of the year and accounted for as CL at year-end.

- Agree the payroll amounts in the profit/loss as expense charged and

payable at the year-end.

- Agree the net amounts (gross pay less deductions) in the post year end
bank statements.

- Review the notes to the accounts and ensure complete disclosures are
made related to the accrued wages.

Substantive Procedures – 12 4 By:- Haris Hanif