To verify the owners’ equity the auditor verifies following aspects:
Share capital is properly classified and described in the accounts
Movement in share capital is properly authorized and correctly presented
Reserves are properly classified and presented
Movements in reserves are properly authorized
Verification Methods
- Share capital is properly classified and described in the accounts in accordance with the Companies Ordinance, 1984
1. Check disclosure using Company Accounts Checklist.
2. Agree authorized capital with memorandum of association.
3. Agree issued capital with form A, or obtain certificate from registrar.
4. Obtain list of shareholders.
- Movement in share capital is properly authorized and correctly shown and described in accordance with the Companies Ordinance, 1984
1. Ensure shareholders’ pre-emption rights have been respected.
2. Check that directors were authorized to allot shares.
3. Ensure proper authorization for share redemption.
4. Check authority for share capital reductions.
5. Agree all movements to statement in lieu of prospectus, board minutes, memorandum and articles of association.
6. Consider special rules for allotments of public company shares.
7. Test allotments with supporting evidence and trace entries in register.
8. Test payments with supporting evidence and trace entries in register.
recorded movements.
9. Check additions to allotment lists and cash records and agree totals to recorded movements.
10. Ensure correct treatment of share premiums.
11. Vouch issue expenses.
- Reserves are properly classified and described in the accounts in accordance with the Companies Ordinance, 1984
1. Ensure disclosure complies with Companies Ordinance, 1984.
2. Ensure whether it is clear, which reserves are distributable.
- Movements in reserves are properly authorized and currently shown and described in accordance with the Companies Ordinance, 1984
1. Check movements to minutes of Board’s meeting.
2. Check movements do not contravene statutory restrictions and articles of association.
3. Ensure disclosure of movements and related tax treatment.
