HANDOUT 05

CASE 01: Equity

 Inspect the legal document from registrar to verify the authorized share capital.
 Inspect the minutes of BOD meeting to verify the authorization for issuance of shares.
 Inspect the bank statement to verify $7500 amount received for issuance of shares.
 Inspect the equity movement records to verify $3000 recorded as share capital and $4500
recorded as share premium for classification test.
 Inspect and read the notes to verify the complete disclosure for share issuance as per local
legislation.
 Recalculate the equity movement record to verify the mathematical accuracy.

CASE 02: Bonus Issue and Dividends

 Inspect the legal document from the registrar to verify the authorized share capital.
 Inspect the minutes of BOD meeting to verify the authorization for the issuance of share
capital.
 Obtain the equity movement records to verify the share premium is debited by $275000 and
share capital is credited by $275000.
 Obtain the shareholder’s register to verify the bonus shares were issued to existing
shareholders.
 Inspect the equity movement record to verify the dividend is being paid by distributable
reserves.
 Inspect the liability records to verify $687500 is recorded as dividend payable in balance
sheet as at 31 Dec 20X8.
 Inspect the post year end bank statement to verify the amount paid as dividend and agree it
with dividend receipts.
 Recalculate the bonus and dividend calculations to verify the mathematical accuracy.
 Inspect and read the notes to verify complete disclosure of bonus issue and dividend paid as
per local legislation.

CASE 03: Preference Shares and Loan Notes

 Inspect the legal document to verify the issuance of preference shares.

 Inspect the liability records to verify redeemable preference shares recorded as NCL for
classification test.
 Inspect the bank statement to verify $380000 received for loan notes to confirm
valuation.
 Inspect the income statement to verify interest expense of $8000 is charged.
 Recalculate the liabilities records to verify the mathematical accuracy.
 Review and read the notes to verify the complete disclosure of loan notes and
preference share as per local legislation.