Shadder is a small company that manufactures knitwear products. It employs approximately 120 staff, all of whom are paid by bank transfer. Permanent factory staff are paid on a weekly basis based on the number of hours worked as evidenced by clock cards. Administration and sales staff are paid a monthly salary. The two directors of the company are also paid a monthly salary. Sales staff are paid a quarterly bonus calculated on the basis of sales. Directors are paid an annual bonus based on profits. During peak production seasons, temporary factory staff are hired through an agency and are paid on a weekly basis, based on their output. Supervisors at Shadder authorise documentation indicating the number of items produced by temporary staff. The agency is then paid by bank transfer and it is responsible for paying the temporary staff and for the deduction of tax and national insurance. You will be performing the audit of the financial statements for the year ending 31 March 2021 and you will be responsible for the figures in the financial statements relating to payroll. Describe the substantive audit procedures you will perform on: (i) the payroll balances in the balance sheet of Shadder; (ii) the payroll transactions in the profit and loss account of Shadder.
Shadder is a small company that manufactures knitwear products. It employs approximately 120 staff, all of whom are paid by bank transfer. Permanent factory staff are paid on a weekly basis based on the number of hours worked as evidenced by clock cards.
Administration and sales staff are paid a monthly salary. The two directors of the company are also paid a monthly salary. Sales staff are paid a quarterly bonus calculated on the basis of sales. Directors are paid an annual bonus based on profits.
During peak production seasons, temporary factory staff are hired through an agency and are paid on a weekly basis, based on their output. Supervisors at Shadder authorise documentation indicating the number of items produced by temporary staff. The agency is then paid by bank transfer and it is responsible for paying the temporary staff and for the deduction of tax and national insurance.
You will be performing the audit of the financial statements for the year ending 31 March 2021 and you will be responsible for the figures in the financial statements relating to payroll.
Describe the substantive
(i) the payroll balances in the balance sheet of Shadder;
(ii) the payroll transactions in the
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