Stockholder's Equity

Question 1

How would you test existence of stockholders equity?

Answer 1

Confirm the outstanding shares with a external registrar

Verify that any issuances were consistent with the articles of incorporation; and approved in the minutes of those charged with governance

Question 2

How would you address completeness of stockholders equity?

Answer 2

Read the board minutes for authorization of issuance

Account for the numerical sequence of the stock certificates

Question 3

How would you test rights and obligations?

Answer 3

Verify par or stated value

Review contracts with employee related to stock options for compliance with contract or agreements

Inquire about restrictions related to dividends

Question 4

How would you test valuation?

Answer 4

Trace cash receipts and disbursements to accounting records and to bank statements; read the minutes for authorization of transactions

Verify if the transactions have been authorized