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CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

While auditing the share capital of a company, which of the following procedures would an auditor most appropriately perform to verify the number of shares issued and outstanding at the year-end?

The auditor verifies issued shares by comparing the register of members and share certificate book with the Memorandum and the share capital ledger, reconciling all of them. Fixed asset, payable and depreciation procedures relate to other areas and do not evidence the number of shares outstanding.

  1. ACompare the share certificate book and register of members with the amounts in the Memorandum, and reconcile to the ledgerCorrect
  2. BInspect the fixed asset register for ownership documents
  3. CConfirm balances with trade payables at the year-end
  4. DRecompute depreciation on plant and machinery

Explanation

The register of members, share certificate book, Memorandum (authorised capital) and the share capital ledger together evidence shares issued and outstanding. The other options relate to fixed assets, payables and depreciation, which have no bearing on share capital.

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