Susah Sdn Bhd is a manufacturer airplane parts. You are the senior in charge of Susah Sdn Bhd's audit. The following matters have brought to your attention:

Payroll Expense Payroll expense presents a material item in the Statement of Profit or Loss account of the company.

From your discussion with the Human Resource's director, you understand that under the Malaysian government stimulus package to offset the fallout from the Covid-19 coronavirus. Minimum Employee Pension Fund (EPF) contribution by employees to be reduced by 4% from 11% to 7%. Susah Sdn Bhd's workers have the option to opt out from the scheme and maintain their contribution rate.

All workers are paid monthly by bank transfer. Occasionally, overtime is required of factory workers. Where this occurs, details of overtime worked per employee is collated and submitted to the payroll department by a production clerk. The payroll department pays this overtime in the month it occurs. At the end of each quarter, the company's payroll department sends overtime reports which detail the amount of overtime worked to the production director for their review.

Susah's payroll package produces a list of payments per employee which links into the bank system to produce a list of automatic bank transfer payments. The finance director reviews the total to be paid on the list of automatic payments and compares this to the total payroll amount to be paid for the month per the payroll records. If any issues arise, then the automatic bank transfer can be manually changed by the finance director.

Only one staff is knowledgeable to know how to compute and deducts monthly schedule tax deduction, EPF and SOCSO contribution from its employees' wages and salaries and pays these to Inland Revenue Board, EPF and SOSCO Board in the following month. At the year end the financial statements will contain an accrual for schedule tax, EPF and SOCSO payable.

Bank balances and reconciliation

From the last year audit working papers, it was noted that several bank reconciliations were prepared not on a timely basis; as a result of material errors in the bank general ledger were not rectified immediately. The audit manager wants the bank reconciliation to be comprehensively audited. Susah Sdn Bhd's bank balances are comprised of two bank accounts: an overdraft of RM 8 million a significantly increase since last audit and a longterm loan account of RM5 million. The management is not certain that the bank long term loan will be renewed by the end of 2020.

(i) Design and explain FOUR (4) internal control questionnaires in respect of payroll expenses including reduction of EPF contribution.

(ii) Identify and explain THREE (3) deficiencies on the payroll system.

(iii) Suggest recommendations and test of control procedures to address each of these deficiencies identified in (ii) above.

(iv) Describe FIVE (5) substantive procedures you would perform to obtain sufficient and appropriate audit evidence to accrual for schedule tax deduction, EPF and SOCSO payable.