Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
WP Ref.:
Prepared by:
Date:
Reviewed by
Date
Audit Program
(f)
Equity
Client:
Period:
Subject:
Equity
Amount in Rs.
Account balances:
Classes of transactions:
S. No.
Audit Objectives
Assertions
Risk Assessment
IR
All the equity accounts on the balance
sheet are appropriately authorized and
issued.
Existence, Rights
& Obligations
To ensure that all changes to equity
accounts including transfer to reserve
and dividends have been accounted for
in the books of the company on a timely
basis.
Completeness
To ensure that all equity accounts are
stated on the balance sheet at the
appropriate amounts.
Valuation
To ensure that all equity accounts have
been presented, classified and disclosed
in the financial statements in
accordance with the requirements of
applicable financial reporting
framework i.e. Companies Ordinance,
1984 and applicable International
Financial Reporting Standards.
Presentation &
Disclosure
CR
ROSM
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
S. No.
Audit Procedures
Analytical Procedures
1.
Compare current year balances with prior year and
ensure reasonableness of changes during the year.
2.
Enquire into and obtain explanations for any unusual
changes during the year.
Test of Details
1.
TEST EQUITY BALANCES
A. Obtain a schedule of all equity accounts showing
number of shares authorized, issued, and outstanding at
the beginning and end of the year and all transactions
affecting equity (e.g., dividends, retained earnings)
occurring during the year.
1.
Test the summarization of the schedule.
2.
Trace totals to the general ledger.
3.
Check the number of shares and amount of issued,
subscribed and paid up capital from
a)
Memorandum of association
b)
Form ‘A’
4.
Agree changes in authorized or issued shares to
minutes and documents filed with the SECP.
5.
Examine all changes in capital.
5.1 Trace to appropriate authorizations (e.g.,
board minutes, member’s register).
5.2 Agree number of shares and proceeds from
issuance of new shares to cash receipts and
supporting records. Compute the entries to
par value of outstanding shares and paid in
capital.
Done by
W. P. Ref.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
S. No.
Audit Procedures
5.3 Agree number of shares and value of redemptions
to cash disbursements and supporting records.
5.4 For shares issued as bonus shares
a)
b)
Check board resolution
Check member’s register to ensure that
changes have been made in number of shares
of each member.
B.
Test entries to paid-up capital other than from the
issuance of securities.
C.
Test entries to retained earnings other than from net
income, dividends, and treasury shares.
D. Examine documents supporting treasury shares
transactions during the period. Confirm outstanding
treasury shares.
2.
E.
Examine schedule of shares owned off record and
beneficially by major officers.
F.
Evaluate results of the tests.
TEST DIVIDENDS AND RETAINED EARNINGS
A.
Determine that dividend payment and liability have
been correctly recorded.
1.
Review extracts of board minutes for dividends
proposed and paid.
2.
Re-compute calculation of dividends and trace
total dividends to earnings statement.
3.
Re-compute the liability for dividends.
B.
Agree changes in retained earnings (e.g., income,
dividends) to supporting documentation and trace
ending balance to general ledger and equity accounts.
C.
Evaluate results of the tests.
Done by
W. P. Ref.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
S. No.
Audit Procedures
3.
TEST PRESENTATION OF EQUITY
4.
A.
Determine that for each class of authorised shares, the
title of issue, par or stated value per share, and the
number of shares authorized, issued, and outstanding
are properly recorded and disclosed.
B.
Determine that authorised shares, paid-in capital,
reserves, and retained earnings are properly recorded,
classified and/or disclosed, as appropriate.
C.
Determine that any shares options, warrants, rights, or
conversion privileges existing at the balance-sheet date
are disclosed properly.
D.
Determine that all transactions affecting shareholders'
equity are properly recorded in conformity with
applicable state laws.
TEST SHARES OPTIONS
A.
Obtain a schedule of options granted, cancelled, and
exercised during the audit period, and options
outstanding, exercisable and available for future grant
at the balance-sheet date.
1.
Test the summarization of the schedule.
2.
Review descriptions of the shares option plans and
determine that all activity during the year is in
compliance.
3.
Agree options granted to board minutes and to
schedule of changes in outstanding shares.
4.
Determine that outstanding options are valid.
5.
Agree option price of qualified shares options
granted to market source.
6.
Determine that compensation expense has been
recorded on nonqualified shares options when
appropriate.
7.
Agree options cancelled or expired to supporting
documentation (e.g., employee termination
notice).
Done by
W. P. Ref.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
8.
Evaluate results of the tests.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
S. No.
5.
Audit Procedures
TEST UNUSUAL ENTRIES RECORDED TO
THE GENERAL LEDGER
A.
Investigate journal entries from sources that are
typically not associated with this account.
1.
B.
When selecting items to be tested,
consider (a) our assessment of the risk of
material misstatement due to fraud, (b) the
effectiveness of controls over the
preparation and posting of journal entries,
(c) the entity's financial reporting process
and the nature of the evidence that can be
examined, (d) the nature and complexity
of the accounts, and (e) the amount and
number of such entries. Because
fraudulent journal entries often are made
at the end of a reporting period, our
testing ordinarily should focus on the
journal entries and other adjustments
made at that time. In addition, because
material misstatements in financial
statements due to fraud can occur
throughout the period and may involve
extensive efforts to conceal entries at the
end of the reporting period, we should
consider whether there also is a need to
extend the testing of journal entries to
other periods within the period under
audit.
Examine related accounting records and
determine whether the selected debit/credit is
valid, appropriate, and authorized. Determine
whether the selected entry was properly
recorded in the correct period and consider the
possible implications of such journal entries on
internal control.
Done by
W. P. Ref.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable
S. No.
6.
Audit Procedures
C.
Determine whether the entries exhibit
characteristics of inappropriate or unauthorized
journal entries such as (a) entries made to
unrelated, unusual, or seldom-used accounts or
business segments, (b) entries recorded at the
end of the period or as post-closing entries that
have little or no explanation or description, (c)
entries made either before or during the
preparation of the financial statements that do
not have account numbers, and (d) entries that
contain round numbers or a consistent ending
number.
D.
Evaluate the reasonableness of other
adjustments (e.g., entries posted directly to
financial statement drafts, consolidating
adjustments, report combinations, and
reclassifications) made in the preparation of the
financial statements.
EVALUATE BUSINESS RATIONALE FOR
SIGNIFICANT UNUSUAL TRANSACTIONS
A.
If we become aware of significant transactions
that are outside the normal course of business
or that otherwise appear to be unusual given
our understanding of the entity and its
environment, perform the following
procedures:
1.
Gain an understanding of the business
rationale for such significant unusual
transaction.
2.
Consider whether the transactions
involve previously unidentified related
parties or parties that do not have the
substance or the financial strength to
support the transaction without assistance
from the entity we are auditing.
3.
Determine whether that rationale (or the
lack thereof) suggests that the
transactions may have been entered into
to engage in fraudulent financial
reporting.
Done by
W. P. Ref.
Execution Phase –
Sample Audit Programs
Liabilities – Dividend Payable