Capital Stock Is Accurately Recorded Auditors verify the ending balance in the capital stock account by first determining the number of shares outstanding at the balance sheet date. A confirmation from the transfer agent is the simplest way to obtain this information.
What is the simplest way to verify the number of shares outstanding?
D) a confirmation from the transfer agent is the simplest way to verify the number of shares outstanding at the balance sheet date. D What type of audit test will auditors use when testing to see if the amounts of capital stock transactions are accurately recorded?
When to verify all capital stock transactions?
A 8) When conducting the audit of stockholders' equity it is normal practice to verify all capital stock transactions: A) only when the client is small. B) that are in excess of a material amount.
What does capital stock mean on a balance sheet?
Capital Stock Accounting. The equity section of a balance sheet represents the amount of equity invested by the owners in the business. This equity can be split into earnings retained by the business, and capital stock introduced by the owners. Owners equity = Capital + Retained earnings.
What is the total value of capital stock issued?
The total value of capital stock or share capital issued is then: The 700,000 shares are issued at a price of 2.00 each and the company receives 1,400,000 from the shareholders in cash. If the authorized number of shares is 1,800,000, it can still issue a further 1,100,000 shares at a later date to raise additional cash.
How should an auditor verify the valuation of marketable securities?
How should an auditor verify the valuation of marketable securities at the balance sheet date? Compare the prices of the securities to published closing prices at the balance sheet date.
What is the best audit procedure for determining the existence of unrecorded liabilities?
Examining selected cash disbursements in the period subsequent to the year-end is the best audit procedure for determining the existence of unrecorded liabilities. All liabilities must eventually be paid, and will therefore be reflected in the accounts when paid if not when incurred.
Which of the following is an auditor most likely to confirm from the transfer agent and registrar?
Which of the following is an auditor most likely to confirm from the transfer agent and registrar? Total shares of stock issued. The auditors' program for the examination of long term debt should include steps that require the: Examination of any bond trust indenture.
Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
Which of the following audit procedures is best for identifying unrecorded trade accounts payable? Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period.
How do you test for completeness of liabilities?
One way completeness is assessed is through cutoff testing. This involves looking at incoming and outgoing cash from the business to determine what assets were acquired and what liabilities were incurred during what period.
How do you test for unrecorded liability?
Search for unrecorded liabilities involves reviewing payment vouchers issued after year-end and unpaid supplier invoices as at the date of audit to check that all material liabilities relating to the financial year have been recorded as at year-end.
Which of the following is the most important consideration of an auditor when examining the stockholders equity section of an entity's balance sheet?
Which of the following is the most important audit consideration when examining the stockholders' equity section of a client's balance sheet? c. Stock dividends are capitalized at par or stated value on the dividend declaration date.
Which procedure is an auditor most likely to use to detect a check outstanding at year end that was not recorded as outstanding on the year end bank reconciliation?
Which procedure is an auditor most likely to use to detect a check outstanding at year-end that was not recorded as outstanding on the year-end bank reconciliation? Receive a cutoff statement directly from the client's bank.
How do you verify internal controls?
How Do You Evaluate Internal Controls Deficiencies?Assess the Control Environment. ... Evaluate Risk Assessment. ... Investigate Control Activities. ... Examine Information and Communication Systems. ... Analyze Monitoring Activities. ... Index Existing Controls. ... Understand which Controls Are Relevant to the Audit.More items...•
Which of the following documents is best for verifying the correct balance in accounts payable?
Which of the following is most reliable for verifying the correct balance of accounts payable? Vendors' statements and vendors' invoices are both relatively reliable evidence because they: originate from a third party.
Which of the following procedures is the most efficient at detecting unrecorded liabilities at the balance sheet date?
Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities? Compare cash disbursements in the subsequent period with the accounts payable trial balance at year-end.
What procedures can be adopted by the auditor to detect unrecorded liabilities during an audit of the purchasing process?
The auditor should verify the unrecorded liability by applying the given audit procedures:The auditor shall verify purchase orders and all supporting documents with journal entries related to purchases and cash disbursals. ... Analytical procedures are done in order to test the trend and look for unusual relations.More items...
What are the two types of capital stock?
The two types of capital stock usually issued are common stock , and preferred stock. The owners of the common stock (stockholders) own the equity in the business entitling them to a distribution of the profits. The owners control the business by appointing the board of directors who manage the business, and by voting on major issues of policy.
What is the process of buying and selling shares in a company?
Share Trading. Share trading is the process of buying and selling shares in a company. It is important to note that this process goes on between shareholders and has no accounting or bookkeeping impact on the company unless the shares are issued or purchased (see treasury stock) by the company.
What is a share certificate?
A share is a term used to describe a unit of capital stock, and is identified by a share certificate or stock certificate which can be traded by the shareholder. For example, if a company has issued 1,000 shares and a shareholder owns 100 shares then they own 100 / 1000 = 10% of the capital stock of the company entitling them to 10% ...
What is authorized shares?
Authorized shares: The maximum number of shares the company is allowed to issue. Issued shares: The shares actually issued to stockholders. Unissued shares: Authorized shares which have not yet been issued. Outstanding shares: Issued shares which are still held by stockholders.
What is equity on a balance sheet?
The equity section of a balance sheet represents the amount of equity invested by the owners in the business. This equity can be split into earnings retained by the business, and capital stock introduced by the owners. When a business operates through a company or corporation the equity is referred to as stockholders’ equity, shareholders’ equity, ...
What is owner equity?
Owners equity = Capital + Retained earnings . When a business operates through a company or corporation the equity is referred to as stockholders’ equity, shareholders’ equity, shareholders’ investment or capital and the capital introduced is referred to as capital stock or share capital, and represents ownership in the company or corporation.
What is a share of stock?
The unit of ownership in the business is called a share of stock. The amount of the company a shareholder owns will depend on how much of the capital stock (share capital) they own, and this in turn will depend on how many shares they own. A share is a term used to describe a unit of capital stock, and is identified by a share certificate ...
What is share capital?
Share capital in the owner’s equity of the corporate clients can be the common share or preferred share. In this case, share capital accounts can change when the corporation issues or repurchases the shares.
What is valuation assertion?
Valuation assertion tests whether the share capital on the balance sheet has been properly valued in accordance with applicable accounting standards. Usually, valuation doesn’t have many issues as the share issue is usually done in the form of cash transactions.
What is presentation and disclosure assertion?
In the audit of share capital, presentation and disclosure assertion is also an important assertion that we need to properly examine. We need to make sure that sufficient and proper information about share capital have been disclosed in accordance with applicable accounting standards.
Is share capital reported on the balance sheet?
Share capital reported on the balance sheet really exists at the reporting date. All share capital transactions that should have been recorded have been recorded. Share capital balances are valued in accordance with applicable accounting standards.