Stockholder's Equity

Question 1

Identify a few audit procedures that address the rights and obligations assertion for stockholder’s equity.

Answer 1

1. )Review minutes of meetings of those charged with governance for authorization of stock-related transactions.
2. )Review the entity’s compliance with contracts for employee stock plans.
3. )Inquire of management about any restrictions applicable to retained earnings.

Question 2

Identify an audit procedure that addresses the existence assertion for stockholder’s equity.

Answer 2

If the entity has an external registrar, confirm the outstanding shares of stock.

Question 3

Identify an audit procedure that addresses the completeness assertion for stockholder’s equity.

Answer 3

1. )Read the minutes of meetings of those charged with governance for authorization of any stock-related transactions that should have been recorded.
2. )Verify that all certificate numbers are accounted for.

Question 4

Identify an audit procedure that addresses the valuation assertion for stockholder’s equity.

Answer 4

1. )Review the cash receipts journal and the cash disbursements journal for any changes related to the stock accounts.
2. )Compare the subsidiary ledger related to the stock accounts to the general ledger balance.
3. )Verify the par value on the stock certificate or the stated value in the minutes of meetings of those charged with governance.