Page 173 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes  The audit of calls on shares requires examination of calls-in-arrears and calls received in
advance. In case some shareholders fail to pay money due on calls, companies may be
forced to forfeit shares and reissue the same.
 Redemption of preference shares can be made either out of fresh issue of shares or out of
profits. An equivalent amount should be transferred to capital redemption reserve account
in case these are redeemed out of distributable profits.
 If bonus shares have been issued, the auditor is required to check compliance with all
statutory and other procedural requirements in this regard.
 A company may after its share capital in various ways. The auditor has to ensure that
necessary procedure, has been followed for the purpose and alterations are duly reflected
in all the relevant documents and records.
 Finally, audit of share transfers does not form part of normal audit work but companies
get audited transfer of shares on a regular basis to ensure accuracy of the share transfers.

9.11 Keywords

Authorised Share Capital: The number and par value, of each class of shares that an enterprise
may issue in accordance with its instrument of incorporation. This is sometimes referred to as
nominal share capital.
Bonus Shares: Shares allotted by capitalization of the reserves or surplus of a corporate enterprise.
Call: A demand pursuant to terms of issue to pay a part or whole of the balance remaining
payable on shares or debentures after allotment.
Called-up Share Capital: The part of the subscribed share capital which shareholders have been
required to pay.
Capital Redemption Reserve: A reserve created for the redemption of preference shares out of
its distributable profits.
Issued Share Capital: Portion of the authorized share capital which has actually been offered for
subscription is known as issued share capital. It includes any bonus shares allotted by the
corporate enterprise.
Paid-up Share Capital: That part of the subscribed share capital for which consideration in cash
or otherwise has been received. This includes bonus shares allotted by the corporate enterprise.

Preliminary Expenses: Expenses relating to the formation of an enterprise. These include legal,
accounting and share issue expenses incurred for formation of the enterprise.
Reduction of Share Capital: The extinguishment or reduction of shareholders’ liability on in
respect of the subscribed share capital.
Share Capital: Aggregate amount of money paid or credited as paid on the shares and/ or stocks
of a corporate enterprise.
Share Issued for Consideration other than Cash: The shares issued to vendors as consideration
for the assets acquired from them.
Subscribed Share Capital: Portion of the issued share capital which has actually been subscribed
and allotted is known as subscribed capital. It includes any bonus shares allotted by the corporate
enterprise.
Unissued Share Capital: That portion of the authorized share capital for which shares have not
been offered for subscription.

168 LOVELY PROFESSIONAL UNIVERSITY