Verification of capital share


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Verification of capital share

  1. 1. Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares. Also known as "equity financing".
  2. 2. • Authorized share capital is also referred to, at times, as registered capital. It is the total of the share capital which a limited company is allowed (authorized) to issue. It presents the upper boundary for the actually issued share capital. – Shares authorized = Shares issued + Shares unissued
  3. 3. 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.
  4. 4. 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. 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.
  5. 5. 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.
  6. 6. • A private limited company has two types of share capital: • Equity share capital • Preference share capital EQUITY SHARE CAPITAL This type of share capital is that part of capital that is not a preferential. In other words it is the basic kind of capital or an ordinary share capital
  7. 7. • This part of capital has the following characteristics: • It carries a preferential right as to the payment of dividend over other type of capital. It carries the preferential right as to payment of capital in case of winding up or repayment of capital over the over the other type of capital.
  8. 8. SPECIAL POINTS IN AUDIT OF SHARE CAPITAL In case of share capital issued by the company following points merit consideration of the auditor • Auditor should check the minutes of the meeting of the board of directors to check the authorization of the terms of the terms of the issue of share capital.
  9. 9. Auditor should test check the share application forms and vouches their respective entries in the cashbook. It should be checked that the legal requirements as laid down by the companies act, and other regulatory bodies are met.
  10. 10. Auditor should check that various compilation requirement of various statements with the registrar of companies are met with. While doing the audit of share capital auditor should vouch the following carefully o Memorandum of association o Articles of association o Minutes of the directors meetings o Prospectus o Share application form o Letters of allotment o Letters of refund o Share registers o Cashbook o Ledger accounts.