Professional Documents
Culture Documents
Internal Controls
When internal controls over notes payable are deficient, auditors may need to perform
extended procedures to test for omitted notes payable.
C. Owners’ Equity
Internal controls
- Proper authorization of transactions
Issuance of capital stock
Repurchase of capital stock
Declaration of dividends
- Proper record keeping and segregation of duties
Actual owners of the stock are recognized in the corporate records
The correct amount of dividends is paid to stockholders owning the stock as of the
dividend record late
The potential for misappropriation of assets is minimized
- Independent registrar and stock transfer agent
Required to engage an independent registrar as a control to prevent the improper issue of
stock certificates
Audit of capital stock and paid-in capital
Audit of dividends
Audit first analyze retained earnings for entire year. The audit schedule showing the analysis,
which is usually a part of the permanent file, includes a description of every transaction
affecting account.