Tax Accruals-MarJUn 2018

Dear Mr Kim,

I always see for the checking of the balance in the financial statements that we have to compare last year amount with this year balance in the financial statement like in the following question.Now how we decide that one of our checking procedures is to compare this year balance with the prior year one .I mean what is key matter which allow to take such a procedure that I should compare this with last year,

Thanks,

Q
Marchjuun2018 section B

In addition to tax deductions from pay, some employees’ wages are reduced for such items as repayments of student
loans owed to the central government. All employers have a statutory obligation to remit funds on a timely basis and
to maintain accounting records which reconcile with annual loan statements sent by the government to employers. At
Raspberry Co student loan deduction forms are completed by the relevant employee and payments are made directly
to the government until the employee notifies HR that the loan has been repaid in full
Required:
(d) Describe the substantive procedures the auditor should perform to confirm the year-end accrual for tax payable

Answer

(d) Accrual for income tax payable on employment income
Procedures the auditor should adopt in respect of auditing this accrual include:
– Compare the accrual for income tax payable to the prior year, investigate any significant differences.
– Agree the year-end income tax payable accrual to the general ledger and payroll records to confirm accuracy.
– Re-perform the calculation of the accrual to confirm accuracy and discuss any unexpected variances with management.
– Agree the subsequent payment to the post year-end cash book and bank statements to confirm completeness.
– Review any correspondence with tax authorities to assess whether there are any additional outstanding payments due; if
so, agree they are included in the year-end accrual.
– Review any disclosures made of the income tax accrual and assess whether these are in compliance with accounting
standards and legislationon employment income.