22-27 The following audit procedures are commonly performed by auditors in the verification of owner's equity: 1. Review articles of incorporation and bylaws for provisions about owners' equity. 2. Analyze all owners' equity accounts for the year and document the nature of any recorded change in each account. 3. Confirm capital stock transactions with the stock registrar and transfer agent. 4. Confirm shares issued and outstanding with the stock registrar and transfer agent. 5. Review the minutes of the board of directors' meetings for the year for approvals related to owner's equity. 6. Recompute earnings per share. 7. Review debt provisions and senior securities with respect to liquidation preferences, dividends in arrears, and restrictions on the payment of dividends or the issue of stock. Required: a. State the purpose of each of these seven audit procedures. b. List the type of misstatements the auditors can uncover by the use of each audit procedure.

22-27 The following audit procedures are commonly performed by auditors in the verification of owner's equity: 1. Review articles of incorporation and bylaws for provisions about owners' equity. 2. Analyze all owners' equity accounts for the year and document the nature of any recorded change in each account. 3. Confirm capital stock transactions with the stock registrar and transfer agent. 4. Confirm shares issued and outstanding with the stock registrar and transfer agent. 5. Review the minutes of the board of directors' meetings for the year for approvals related to owner's equity. 6. Recompute earnings per share. 7. Review debt provisions and senior securities with respect to liquidation preferences, dividends in arrears, and restrictions on the payment of dividends or the issue of stock. Required: a. State the purpose of each of these seven audit procedures. b. List the type of misstatements the auditors can uncover by the use of each audit procedure.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance

Section: Chapter Questions

Problem 23RQSC

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The following audit procedures are commonly performedby auditors in the verification of owners’ equity:1. Review the articles of incorporation and bylaws for provisions about owners’ equity.2. Analyze all owners’ equity accounts for the year and document the nature of anyrecorded change in each account.3. Account for all certificate numbers in the capital stock book for all shares outstanding.4. Examine the stock certificate book for any stock that was cancelled.5. Review the minutes of the board of directors’ meetings for the year for approvalsrelated to owners’ equity.6. Recompute earnings per share.7. Review debt provisions and senior securities with respect to liquidation preferences,dividends in arrears, and restrictions on the payment of dividends or the issue of stock.a. State the purpose of each of these seven audit procedures.b. List the type of misstatements the auditors can uncover by the use of each auditprocedure.
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Describe the audit procedures you would use to learn about each of the situations listed. Begin by identifying all of the audit procedures you would use to learn about situation 1. (Select the 4 choices that apply.) A.Analyze legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. B.Review records for unusual journal entries made to the equity accounts (Common stock and Retained earnings) subsequent to year-end. C.Discuss, specifically, any related party transactions with management and include information in letter of representation. D.Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. E.Confirm details of stock transactions with registrar and transfer agent. F.Review financial statements of affiliate, and where related party transactions are apparent, make direct…
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The auditors join client stock take at the year end and see whether the way that they count is in the correct procedures or not. This procedure is an example of: * Observation Inquiry Inspection of tangible assets O Inspection of records and documents
In a manufacturing company which one of the following audit procedures would give the least assurance of the existence of the assets in the general ledger balance of investment in stocks and bonds at the audit date? Examination of paid checks issued in payment of securities purchased. Vouching all changes during the year to brokers' advises and statements. Confirmation from the broker. Inspection of year-end brokers' statements.
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