ACCA F8 - Audit and Assurance Revision Kit 2016

– Reconcile the total wages and salaries expense per the payroll records to the cost in the financial
statements and investigate any differences.
– Agree amounts owed to the tax authorities to the payroll records and with the amount subsequently
paid and clearing the bank statement post year-end to ensure completeness.
– Cast a sample of payroll records to confirm completeness and accuracy of the payroll expense.
– Recalculate the gross and net pay for a sample of employees and agree to the payroll to confirm
accuracy.
– Re-calculate statutory deductions to confirm whether the correct deductions are included within the
payroll expense.
– Perform a proof in total of total factory workforce wages by taking last year's expense, dividing by
last year's average employee numbers to arrive at an average wage and multiplying by current year
average employee numbers (the calculation should also incorporate the pay increase). Compare this
estimate of the current year charge with the actual wages cost in the financial statements and
investigate significant differences.
– Agree the start or leaving date to supporting documentation for a sample of joiners and leavers, and
recalculate their first or last pay packet to ensure it was accurately calculated and properly recorded.
– Agree the total net salaries paid on the payroll records to the bank transfer listing of payments for
sales and administrative staff, and to the cashbook for weekly paid employees.
– Agree the total cash withdrawn for wage payments equates to the weekly wages paid plus any left
over cash subsequently banked to confirm completeness and accuracy.
– Agree individual wages and salaries per the payroll to the personnel records and records of hours
worked per the swipe card system.
(Note: Only six procedures were needed to gain full marks.)
(c)
Responsibilities – Laws and regulations
It is Chuck Enterprises management that have a responsibility to ensure that the entity complies with the
relevant laws and regulations. It is not the auditor's responsibility to prevent or detect non-compliance with
laws and regulations.
The auditor's responsibility is to obtain reasonable assurance that the financial statements are free from
material misstatement, and in this respect, the auditor must take into account the legal and regulatory
framework within which the entity operates.
ISA 250 Consideration of laws and regulations in an audit of financial statements distinguishes the auditor's
responsibilities in relation to compliance with two different categories of laws and regulations:
Those that have a direct effect on the determination of material amounts and disclosures in the
financial statements
Those that do not have a direct effect on the determination of material amounts and disclosures in
the financial statements but where compliance may be fundamental to the operating aspects, ability
to continue in business, or to avoid material penalties.
For the first category, the auditor's responsibility is to obtain sufficient appropriate audit evidence about
compliance with those laws and regulations. For the second category, the auditor's responsibility is to
undertake specified audit procedures to help identify non-compliance with laws and regulations that may
have a material effect on the financial statements.
Blair & Co must also maintain professional scepticism and be alert to the possibility that other audit
procedures may bring instances of identified or suspected non-compliance with laws and regulations.
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