You are responsible for the audit of trade payables and purchases of Powerbase for the year ended 31 May 2020. You carried out interim audit work on purchases and trade payables at 30 November 2019 and concluded that purchases were being properly processed although you were somewhat concerned that delays in processing were occurring. Your concern was heightened by a comment by a member of the accounting staff: ‘I don’t know what you are worried about. If we haven’t recorded a liability, the supplier will soon remind us!’

You have now been given the following figures (including some ratios) and aim to ensure that purchases and trade payables at 31 May 2020 are fairly stated. Design substantive programme steps that will help you to accomplish this aim. You should refer to our comments on the Powerbase.

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Year to 31 Year to 31 May 2019 May 2020 fm m Sales 95.2 110.0 Cost of sales 54.8 51.0 Gross profit 40.4 59.0 (42.44%) (53.64%) Administrative expenses 22.3 20.2 Selling expenses 10.5 32.8 9.4 29.6 Net profit before taxation 7.6 29.4 Inventory 11.3 75 days 11.7 84 days Trade receivables 11.7 45 days 12.8 42 days Trade payables 9.01 60 days 8.2 59 days