Auditing
Revision Questions
TOPICS COVERED: Audit the Share Issue
Financial Assistance
Public Interest Score
Code of Professional Conduct and King IV
Revision Question 1: Audit the Share Issue
How would you audit the transaction where the issue of shares was in excess of
the authorised share capital, and the decision was not retrospectively adopted by
the shareholders? (8)
Solution: Revision Question 1 – Audit the Share Issue
Test that the issue is in excess of authorised
Inspect the MOI to determine the number of authorised shares (1)
Inspect the MOI and share register to determine the number of shares in
issue prior to the new issue (1)
Recalculate the total shares in issue adding the new share issue to the
current shares in issue to determine whether the issued shares exceed the
authorised shares (1)
New issue
Inspect the minutes of the board meeting to confirm that:
, - The meeting was quorate (1)
- The majority present voted in favour of the decision to issue the shares (1)
- The number of shares issued agrees to the share register and stated capital
account in the general ledger. (1)
Inspect the bank statement for cash received from shareholders for the
issue (1)
Retrospective authorisation denied
Inspect the minutes of the shareholders meeting, subsequent to the issue
of shares and confirm:
- The meeting was quorate (25% or more of the voting rights present) (1)
- Less than 75% of the shareholders presented voted in favour of the issue
(1)
- No special resolution was passed (1)
Reversal of issue
Obtain the interest rate from the bank and compare to the interest rate
used (1) Recalculate the interest payable on the issue of shares (1)
Inspect the bank statement for payment (including interest) to
shareholders whose issue has been denied (1)
Inspect the share certificates have been nullified (1)
Inspect the share register for the cancellation of the new issue (1)
Inspect the accounting records for the reversal of the new issue (1)
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