Capital

Question 1

How to audit share equity capital?

Answer 1

1. Agree authorised share capital with the statutory documents governing the company’s constitution
2. Agree changes to authorised share capital with properly authorised resolutions

Question 2

How to audit the issue of shares?

Answer 2

1. Verify any issue of share capital or other changes during the year with general and board minutes
2. Ensure issue or change is within the terms of the constitution and directors possess appropriate authority to issue shares
3. Confirm that cash or other consideration has been received or receivable is included as called up share capital not paid

Question 3

How to audit the transfer of shares?

Answer 3

1. Verify the transfer of shares by reference to:
   - Correspondence
   - Completed and stamped transfer forms
   - Cancelled shar certificates
   - Minutes of directors’ meeting
2. Review the balance on shareholders’ accounts in the register of members and the total list with the amount of issued share capital in the general ledger

Question 4

How to audit dividends?

Answer 4

1. Agree dividends paid and declared pre year end to authority in minute books and reperform calculation with total share capital issued to ascertain whether there any outstanding or unclaimed dividends
2. Agree dividend payments to documentary evidence
3. Test that dividends do not contravene distribution provisions by reviewing the legislation

Question 5

How to audit reserves?

Answer 5

1. Agree movement on reserves to supporting authority
2. Ensure that movements on reserves do not contravene the legislation and the company’s constitution by reviewing the legislation
3. Confirm that the company can distinguish distributable reserves from those that are not non-distributable
4. Ensure that appropriate disclosures of movements on reserves are made in the company’s accounts by inspection of the financial statements