3. 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".

4. • 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

7. 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.

8. 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.

9. 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.

10. • 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

11. • 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.

12. 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.

13. 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.

14. 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.