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This is a special sort of liability of a company. When share capital has been issued in a year its
verification is as follows:
i. Ensure the issue is within the limits authorized by memorandum and articles of
association.
ii. Ensure the issue was subject to a director’s minute.
iii. A scertain and evaluate the system for control of issue.
iv. V erify that the system has been properly operated. This will involve examining the
prospectus (if there is one) applications, applicators, application and allotment sheets,
the share register, cash received records, share certificate counterfoils and repayment
to unsuccessful applicants.
v. When the issue was one which was contingent upon permission to deal being received
from stock exchange then:
• Ensure that permission has been obtained. If it has not been given, all money
subscription must be returned.
• Ensure all the money was kept in a separate bank account until all conditions were
satisfied.
• Ensure that the minimum subscription has been received. If there are not enough
subscribers then the whole is returned.
When the issue is not for cash but for other consideration vouch the agreement and ensure that
all entries are properly made.
Vouch the payment of underwriting and other fees. When no new issue of shares has been made
the audit work will include:
a. Determine the total shares of each class as stated in the balance sheet and obtain a list
of shareholdings which in total should agree with the balance sheet total.
b. Test the balances in the share register with the list and vice versa.
c. I f this is not possible at the balance sheet it may be permissible to do it earlier provided
that the auditor is satisfied with the system of control over transfers.
d. When the share register is maintained by an independent firm of registrars, the auditor
should obtain a certificate that the above work (a & b) has been done
Wilfykil answered the question on April 12, 2019 at 06:50
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