AUDIT OF CASH

Audit Objectives Cash

To determine that:
Cash balances at the end of the reporting period represent cash and cash items on hand,
in transit to, or in depository banks
Cash transactions have been properly recorded
Cash balances are properly described and classified and adequate disclosures with
respect to amounts restricted as to withdrawal are made in the financial statements
Audit Program Cash
1. Conduct a cash count of undeposited collections, petty cash, and other funds
2. Confirm bank balance by direct correspondence with all banks in which the client has had
deposits and loans during the year
3. Obtain bank reconciliation
4. Obtain cutoff bank statement showing the clients transactions with the bank at least one week
after the reporting date
5. Obtain a list of interbank transfers of funds a few days before and after the reporting date
6. Test reasonableness of cutoff
7. Inspect savings account passbook and certificates of deposits
8. Determine any restrictions on availability of cash
9. Determine propriety of financial statement presentation and adequacy of disclosures
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______
_______
_______
_______

2. Are there guidelines for accepting remittances that do not agree to

amounts owed to the company?

_______

3. Are there procedures in place to establish a proper cut-off of cash

receipts at the end of the fiscal year?

_______

4. Do control procedures exist regarding the collection, timely

deposit, and recording of collections in the accounting records at
each collection location?

_______

5. Are pre-numbered receipts issued for all cash collections and are
numbers of all receipts accounted for?

_______

_______

System
1. Are the following duties distributed among at least two individuals?
Authorize Cash Receipts
Record Cash Receipts
Deposit Cash Receipts
Reconcile Cash Receipts

Segregation of Duties
6. Are the following duties generally performed by different people:
Custodian of the fund, reconciliation of the fund and access to
cash receipts

_______

_______

_______

_______

_______
_______

_______

8. Are petty cash vouchers or bills required for all petty cash
disbursements and are they pre-numbered?

_______

9. Are petty cash vouchers signed by persons receiving the cash?

_______

10. Are petty cash vouchers approved in writing by department head

or other responsible officials?

_______

11. Are petty cash vouchers properly supported by vendor receipts?

_______

Cash Collections
12. Are cash collections recorded immediately upon receipt in the cash
registers or cash receipt book?

_______

13. Are receipt forms pre-numbered and periodically accounted for?

_______

14. Are cash shortages identified, analyzed, recorded and reported

immediately?

_______

15. Are security personnel or anybody held responsible or accountable

for mail used to transport deposits to the cash officer or to the local
bank?

_______

Monitoring
16. Are funds periodically counted by a person other than the
custodian at unannounced times?

_______

17. Are timely corrective actions taken in cash discrepancies?

_______

Payments
18. Are the following duties distributed among at least two individuals:
Authorize payments
Have custody of cash
Record payments
Reconcile cash payments

_______
_______
_______
_______

19. Are all approved payments supported by proper documentation

such as original vendor invoices?

_______

20. Are there procedures to ensure that individuals performing the

monthly review of companys disbursements for all purposes is not
the same individual who approves requisition of travel and for other
purposes?

_______

21. Are all expenditure transactions and related vouchers

independently reviewed for completeness, accuracy, and
compliance with company policies and in agreement with
supporting documentation before being approved for payment?

_______

Filling out disbursement receipts, disbursement, and

reconciliation
Making a deposit, billing, making General Ledger entries, and
collecting
Collecting cash, placing a restrictive endorsement in Cheques,
balancing cash, closing cash registers, making a deposit,
maintaining Accounts Receivable records and making General
Ledger entries
Collecting of licenses, fines and inspections and making
General Ledger entries
Collecting cash and reconciling the bank account
Closing cash registers daily by a person not involved in cash
collection
Petty Cash Management
7. Are all petty cash funds maintained on an imprest basis?

AUDIT OF INTANGIBLES
Audit Objectives Intangible Assets
To determine that:
Assets represent amounts that are reasonably expected to be realized through future
operations or otherwise, that they are properly recorded
Assets are properly described and classified, and adequate disclosures have been made
in the financial statements
Audit Program Intangible Assets
1. Obtain an analysis of intangible assets.
2. Verify the accuracy of the analysis by performing tests of mathematical computations to the
extent deemed necessary.
3. Examine transactions of prior periods to determine if costs had been capitalized in accordance
with PAS 38, Intangible Assets
4. Trace the beginning balances to last years working papers.
5. Vouch current year transactions to supporting documentation.
6. Determine if amortization policies are in accordance with PAS 38 and recalculate amortization
recorded by the client.
7. Determine if there is proper allocation of the amortization recorded for the period.
8. Determine if there is impairment in the value of the intangible assets.
9. Determine propriety of financial statement presentation and adequacy of disclosures.
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______

2. Are gains or losses properly recognized from disposals of

intangible assets in proprietary fund types?

_______

3. Are intangible asset subsidiary accounts balanced to the intangible

asset control accounts on a monthly basis?

_______

_______

5. Are current year costs expensed rather than capitalized?

_______

Use of Assets
6. Is proper usage of assets explained clearly to employees and
users?

_______

_______

General
1. Is there a formal organizational chart defining the responsibilities
of purchasing, receiving, recording, and approving the assets?

Acquisitions, Additions and Procurements

4. Is the total purchase price, less discount and any expenditure
required to place asset in its intended state of operation the amount
capitalized by the company?

7. Is access to valuable or sensitive asset items restricted to

authorized users only?

_______

_______

_______

_______

_______

_______

14. Is a physical inventory of capitalized assets and inventoried items

taken each time there is a change at a management or supervisory
level that has responsibility for the assets?

_______

15. Are missing items investigated and reasons for them documented?

_______

8. Are authorized users provided with proper training on the correct

use of the assets?
Protection of Assets
9. Are procedures in place to safeguard valuable and sensitive assets
against theft or damage?
10. Is a regular maintenance schedule followed to maintain the
functionality and value of assets?
Accounting
11. Are detailed records of assets maintained showing identification
number, classification, description, location and original cost?
12. Are there procedures in place for writing-off fully amortized
intangible assets?
Monitoring
13. Are the physical inventory worksheets approved by the CFO or
Controller before the fixed asset officer makes changes to the fixed
asset system?

AUDIT OF INVENTORIES
Audit Objectives Receivables
To determine that:
Inventories included in the statement of financial position physically exist
Inventories represent items held for sale in the ordinary course of business, in the process
of production for such sale, or in the form of materials or supplies to be used in the
production process or in the rendering of services
Inventory quantities include products, materials and supplies owned by the company (on
hand, in transit, or stored at outside locations)
The entity has legal title or similar rights of ownership to the inventories
Inventories are properly stated at the lower of cost and net realizable value
Inventories are properly described and classified in the financial statements and
disclosures are adequate
Audit Program Receivables
1. Observe physical inventory counts
2. Obtain confirmation of inventories at locations outside the entity
3. Review perpetual inventory records, production records, and purchasing records for
indications of current activities
4. Analytically review the relationship of inventory balances to recent purchasing, production,
and sales activities, and to anticipated sales volume
5. Examine paid vendors invoices, consignment agreements, and contracts
6. Review direct labor rates
7. Test the computation of standard overhead rates
8. Examine analysis of purchasing and manufacturing standard cost variances
9. Examine inventory turnover analysis
10. Review industry experience and trends
11. Tour the plant
12. Inquire production & sales personnel concerning possible excess or obsolete inventory items
13. Examine sales after year-end and open purchase order commitments
14. Obtain confirmation of inventories pledged under loan agreements
15. Review drafts of the financial statements
16. Compare the disclosures made in the financial statements other requirements of PFRS
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:

Description
1. Is there a formal organizational chart defining responsibilities of
ordering, accepting, approving, processing & recording inventory?

Yes

No

N/A

Remarks

_______

2. Are policies established to ensure that inventories are not

stockpiled or to prevent over-ordering?

_______

3. Are inventories properly maintained in the store room to identify

them with the associated project/contract/subcontract?

_______

4. Are steps documented to ensure that goods received are

accurately counted and examined to see that they meet quality
standards and specifications?

_______

Segregation of Duties
5. Are the following duties generally performed by different people:
Receiving and issuing inventory and operational duties
Receiving and issuing inventory and taking physical inventory
Receiving and issuing inventory and approving of
expenditures, recording transactions in the general ledger, and
reconciliation of subsidiary records to control accounts

_______
_______
_______

Authorization and Access

6. Is access to inventory locations limited by physical controls?

_______

_______

_______

_______
_______

_______

_______

8. Are pre-numbered tags or codes used during the physical

inventories count?

_______

9. Is access to the perpetual inventory records limited to authorized

individuals only?

_______

_______

11. Are perpetual inventory balances reconciled against the General

Ledger control accounts at least annually?

_______

12. Does management periodically check inventory reports?

_______

13. Are deviations of reports followed up by management in a timely

manner?

_______

14. Does management assess inventory policies and procedures

periodically?

_______

7. Are physical inventories:

Supervised by someone independent of the custodial or record
keeping functions?
Made by or tested by employees independent of the
department being inventoried?
Recorded on permanent inventory count sheets?
Re-recorded on count sheets signed and dated by the person
supervising the count?
Planned to provide provisions for cut-off of receipts and
issues?
Reflected in the perpetual records based on the actual
inventory quantities?

Monitoring
10. Is a physical inventory count taken at least annually?

AUDIT OF INVESTMENTS
Audit Objectives Investments
To determine that:
Investments exist and are owned by the entity
All recorded income from investments has accrued to the entity at the end of the reporting
period
All investments owned by the entity at the end of the reporting period are included in the
statement of financial position
All income accruing from investments at the end of the reporting period has been recorded
Investments are included in the statement of financial position at appropriate amounts
All investments are free of liens, pledges, or other security interest, or if not, are adequately
disclosed
Investments and related investment income accounts are properly classified, described
and disclosed in the financial statements in conformity with PFRS
Audit Program Investment
1.
2.
3.
4.

Prepare or obtain an analysis of the investment account

Conduct securities count
Confirm securities and details of securities from the custodian (if held outside)
Review minutes, agreements, and confirmation replies for evidence of liens, pledges, or other
security interests in the entitys investments and of commitments to acquire or dispose of
investments
5. Inspect market quotations, financial statements of investees and other evidence to determine
the current value of investments
6. Discuss with the entity the process used by management in classifying its investments
7. Determine whether the clients investment activities are consistent with tits business model
for managing financial assets
8. Determine whether the decline in fair value of held-for-collection financial assets below
amortized cost is other than temporary and is properly recognized
9. Verify computations of gains and losses from disposals of investments
10. Verify calculations of amortization of premium or discount on held-for-collection financial
assets
11. Determine propriety of financial statement presentation and adequacy of disclosures
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______

2. Are there written policies and procedures that document the flow
of investment processing and identify control procedures?

_______

3. Are there policies and procedures established to ensure

investment certificates are received or appropriately reflected in
the custodial accounts?

_______

4. Are there policies and procedures established to ensure the

acquisition and disposal of investments are properly recorded?

_______

5. Are there policies and procedures established to ensure the

investment income received is recorded properly?

_______

General
1. Do flowcharts exist that document investment processing and
identify control procedures?

Segregation of Duties
6. Are the following duties generally performed by different people:
Cash
flow
management,
investment
transactions,
safeguarding the investments, responsibility for them and
recording of such
Record-keeping functions for securities and income, access to
physical securities, authorization of security transaction, cash
area duties
Initiating, evaluating and approving transactions, detail
accounting and general ledger keeping
Monitoring investment market values and performance, and
investment acquisition
Maintaining detail accounting records and maintaining general
ledger entries

_______

_______

_______

_______

_______

_______

8. Does a responsible official determine that the income earned is

credited to the proper fund?

_______

9. Are securities or legal documents or agreements evidencing

ownership or other rights kept in a vault with limited access, or
preferably, protected in a safety deposit box, on deposit with a
corporate trustee or broker?

_______

10. Are periodic comparisons made between income received and

terms of the security or publicly available investment information?

_______

Monitoring
7. Is the classification of investments in the General Ledger
periodically reviewed? Are these classifications properly
documented by management?

AUDIT OF LIABILITIES
Audit Objectives Accounts Payable
To determine that:
Accounts payable represents amounts currently payable to trade creditors for purchases
of goods and services as at the end of the reporting period.
Accounts payable have been properly recorded.
Accounts payable are properly described and classified and adequate disclosures have
been made.
Audit Objectives Non Current Liabilities
To determine that:
Authorization of liabilities incurred
Validity of recorded liabilities
Recognition and recording of significant liabilities
Compliance with terms, restrictions, conditions, and other requirements of debt
agreements
Assets pledged or mortgaged and other guarantees related to non-current liabilities are
identified
Accuracy of interest and other charges related to noncurrent liabilities
Propriety of financial statement presentation and adequacy of disclosures
Audit Program Accounts Payable
1. Obtain a list of accounts payable from the subsidiary ledger, and check its footing; check if
the list reconciles with the general ledger control account; trace individual balances to the
subsidiary ledger; test the accuracy of balances in the subsidiary ledger; adjust non-trade
accounts erroneously included in suppliers accounts; investigate and reclassify significant
debit balances.
2. Confirm accuracy of individual balances appearing in the subsidiary ledger.
3. Review correspondence with suppliers for possible adjustments.
4. Test propriety of cutoff.
5. Ascertain whether some payables are secured with asset pledges.
6. Compare payments after the reporting date with year-end schedule of accounts payable
7. Review propriety of financial statement presentation and adequacy of disclosures
8. Perform analytical review procedures
9. Obtain accounts payable representation letters.
Audit Program Non Current Liabilities
1. Obtain schedules of non-current liabilities
2. Foot and cross-foot the schedules
3. Verify accuracy of the schedules
4. Verify authorization by reference to minutes of the board of directors meetings
5. Confirm directly with the creditors or trustees the principal amount still outstanding, interest
rates, interest accrued and collaterals/guarantees
6. Determine clients compliance with loan agreements

7. Account for the used and unused debt instruments like bond certificates and promissory notes
8. Ascertain proper cancelation of paid or retired debt instruments
9. Recomputed the accuracy of an discount or premium amortization
10. Reconcile interest payments with recorded liabilities
11. Verify propriety of financial statement presentation and adequacy of disclosures.
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______

2. Are receiving reports prepared for each item received and copies
transmitted to inventory custodians? To purchasing? To the
accounting department?

_______

3. Are purchases made for employees authorized through regular

purchases procedures?

_______

4. Are quantity and quality of goods received determined at the time

of receipt by receiving personnel independent of the purchasing
department?

_______

5. Are vendors invoices matched against purchase orders and

receiving reports before a liability is recorded?

_______

6. Do managers compare actual expenses to budget?

_______

7. Are vouchers canceled with a PAID stamp when paid?

_______

8. Are shipping documents authorized and prepared for goods

returned to vendors?

_______

9. Are invoices approved for payment by a responsible officer?

_______

Completeness
10. Are the purchase order forms pre-numbered and the numerical
sequence checked for missing documents?

_______

11. Are receiving forms pre-numbered and the numerical sequence

checked for missing documents?

_______

12. Is the accounts payable department notified of goods returned to

vendors?

_______

13. Are vendors invoices listed immediately on receipt?

_______

14. Are unmatched receiving reports reviewed frequently and

investigated for proper recording?

_______

15. Is statistical analysis used to examine overall purchasing levels?

_______

16. Are vendors monthly statements reconciled with individual

accounts payable accounts?

_______

Recurrence
1. Are the purchasing department, accounting department, receiving
department and shipping department independent of each other?

Accuracy
17. Are competitive bids received and reviewed for certain items?

_______

_______

Verification
19. Are purchase prices approved by a responsible purchasing officer?

_______

20. Is accounts payable reconciled to the general ledger every period?

_______

21. Are monthly statements reviewed by senior officials?

_______

_______

_______

_______

18. Are all purchases made only on the basis of approved purchase
requisitions?

Classification
22. Do the chart of accounts and the accounting manual give
instructions for classifying debit entries when purchases are
recorded?
23. Are journal entries authorized at appropriate levels?
Cut-Off
24. Does the accounting manual give instructions to
purchases/payable entries on the date of receipt of goods?

date

AUDIT OF PROPERTY, PLANT AND EQUIPMENT

Audit Objectives Property, Plant and Equipment
To determine that:
All property, plant, and equipment on the statement of financial position (including assets
under finance lease) are owned by the entity and held by the entity or by others on behalf
of the entity
All property, plant and equipment owned or leased under finance leases by the entity at
year end are included in the statement of financial position
Property, plant and equipment are reported at the appropriate amount
The cost of property, plant and equipment is allocated to the appropriate accounting
periods in a systematic and rational manner
Impaired property, plant and equipment are recorded at estimated recoverable value
Property, plant and equipment held for disposal are carried at the lower of their carrying
amount or fair value less costs to sell
Property, plant and equipment and related accounts are properly described, classified and
disclosed in the financial statements, including notes, in conformity with PFRS
Audit Program Property, Plant and Equipment
1. Examine opening balances by:
a. Tracing opening balances to last years working papers (for recurring engagements); or
b. Vouch significant transactions to ascertain authorization, propriety and accounting
principles applied, refer to the working papers of the predecessor auditor and vouch
documents evidencing ownership (for initial audits); or
c. Vouch significant transactions to ascertain authorization, propriety and accounting policies
applied as well as documents evidencing ownership (for first-time audit clients)
2. Examine current year transactions by:
a. Obtain or prepare schedules of the property, plant and equipment accounts
b. Determine authorization of acquisitions by examining invoices, capital expenditure
authorizations, leases and other evidence
c. Examine authorization and other data supporting retirements, sales and other disposal of
property, plant and equipment items
d. Determine whether indications of impairment were identified and whether the method used
was reasonable
e. Examine lease contracts to determine whether leases are properly classified as finance
or operating leases
f.

Examine support for significant charges to repairs, maintenance, and other expense
accounts to determine if they should have been capitalized instead

g. Test computations of depreciation, depletion and amortization to determine the

appropriateness of methods and estimated lives use
h. Review minutes of the meetings, legal documents and other evidence for liens, pledges
and restrictions on property, plant and equipment
i.

Search for unrecorded retirements

j.

Identify idle, no longer in use, and obsolete properties and determine proper accounting
recognition

k. Reconcile payments to government for taxes and registration fees with recorded assets

l.

Ascertain that fully depreciated assets still in use or those that are held for sale are not
further depreciated

m. Determine and discuss with appropriate officials, the adequacy of insurance coverage
n. Determine that property, plant and equipment that are being held for disposal are carried
at appropriate amounts
o. Determine propriety of financial statement presentation and adequacy of disclosures
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______

2. Are there formal written procedures for performing a physical

inventory of fixed assets?

_______

3. Are gains or losses properly recognized from disposals of fixed

assets in proprietary fund types?

_______

4. Are fixed asset subsidiary accounts balanced to the fixed asset

control accounts on a monthly basis?

_______

5. Are property records reconciled periodically to property accounts?

_______

_______
_______

_______
_______

_______

_______

8. Does the recorded asset cost of land purchases include: purchase

price, legal and title fees, surveying fees, appraisal and negotiation
fees, damage payments and site preparation costs?

_______

9. Does the recorded asset cost of building include: purchase price,

contract price plus any other expenditures necessary to put a
structure into its intended state of use such as professional fees,
damage claims, cost of fixtures, insurance premiums, interest and
related costs incurred during the period of construction?

_______

10. Are maintenance costs expensed rather than capitalized?

_______

Use of Assets
11. Is proper usage of assets explained clearly to employees and
users?

_______

_______

General
1. Is there a formal organizational chart defining the responsibilities
of purchasing, receiving, recording, approving and performing the
fixed assets?

Segregation of Duties
6. Are the following duties generally performed by different people:
Custodian of the fixed assets and taking annual inventory
Reconciliation of fixed asset system with control accounts and
making entries in the fixed asset system
Custodian of the fixed assets and tagging
Custodian of the fixed assets and investigating the missing
fixed assets
Custodian of the fixed assets, making entries in the fixed asset
system, and making entries in the general ledger
Acquisitions, Additions and Procurements
7. Is the total purchase price, less discount and any expenditure
required to place asset in its intended state of operation the amount
capitalized by the company?

12. Is access to valuable or sensitive asset items restricted to

authorized users only?

_______

_______

_______

_______

_______

_______

19. Is a physical inventory of capitalized assets and inventoried items

taken each time there is a change at a management or supervisory
level that has responsibility for the assets?

_______

20. Are missing items investigated and reasons for them documented?

_______

13. Are authorized users provided with proper training on the correct
use of the assets?
Protection of Assets
14. Are procedures in place to safeguard valuable and sensitive assets
against theft or damage?
15. Is a regular maintenance schedule followed to maintain the
functionality and value of assets?
Accounting
16. Are detailed records of assets maintained showing identification
number, classification, description, location and original cost?
17. Are there procedures in place for writing-off fully depreciated fixed
assets?
Monitoring
18. Are the physical inventory worksheets approved by the CFO or
Controller before the fixed asset officer makes changes to the fixed
asset system?

AUDIT OF RECEIVABLES
Audit Objectives Receivables
To determine that:
Receivables represent valid claims against customers and other parties and have been
properly recorded
The related allowance for doubtful accounts, returns and allowances, and discounts are
reasonably adequate
Receivables are properly described
Disclosures with respect to the accounts are adequate
Audit Program Receivables
1. Obtain a list of aged accounts receivable balances from the subsidiary ledger
2. Test accuracy of balances appearing in the subsidiary ledger
3. Confirm accuracy of individual balances by direct communication with customers
4. Review correspondence with customers for possible adjustments
5. Test propriety of cutoff
6. Perform analytical procedures
7. Review individual balances and age of accounts with appropriate officer
8. Obtain analyses of significant other receivables
9. Ascertain whether some receivables are pledged, factored, discounted or assigned
10. Determine propriety of financial statement presentation and adequacy of disclosures
11. Obtain receivable representation letter from client
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

_______

2. Does the company have written credit and collection policies that
meet the requirements of contractual terms, the Accounts
Receivable program and other policies and procedures established
by the management and the legal advisor?

_______

3. Do procedures exist to prevent the interception or alternation by

unauthorized persons of billings or statements after preparation but
before they are mailed?

_______

4. Do control procedures exist regarding the collection, timely

deposit, and recording of collections in the accounting records at
each collection location?

_______

Description
1. Is there a formal organizational chart defining responsibilities of
preparing bills, follow-up for certification, receipt of payment
certificates, recording the payment certificates, collecting the
accounts receivable on due date of payment certificates and follow
up of accounts not paid?

Writing-Off Receivable Balances

5. Has an allowance account been established for doubtful accounts
to reflect the amount of the companys receivables that the
management estimates will be uncollectible?

_______

6. Are accounts written-off the Companys financial records when all

collection procedures have been exhausted without success?

_______

7. After write-off, does the company continue to follow up for recovery

of written-off dues?

_______

_______

_______

_______

_______

_______

9. Are all collections n accounts receivable posted to individual

receivable accounts?

_______

10. Is access to the accounts receivable system limited only to

authorized individuals?

_______

Cash Collections
11. Are cash collections recorded immediately upon receipt in the cash
registers or cash receipt book?

_______

12. Are receipt forms pre-numbered and periodically accounted for?

_______

13. Are cash shortages identified, analyzed, recorded and reported

immediately?

_______

14. Are security personnel or anybody held responsible or accountable

for mail used to transport deposits to the cash officer or to the local
bank?

_______

_______

16. Is an aging schedule prepared monthly and is it reviewed by a

responsible manager?

_______

17. Are accounts periodically reviewed for propriety of transactions

and balances by a person independent of cash and accounts
receivable accounting?

_______

18. Are remittances promptly applied against outstanding billings and

receivables?

_______

19. Is there a procedure to follow up on overdue accounts and refer

them to collection companies as appropriate?

_______

20. Are follow up and collection activities properly documented?

_______

Collection of Receivables
8. Are the following duties generally performed by different people:
Billing, collecting, and cash application of accounts receivable
funds
Maintaining detail accounts receivable records, collecting, and
General Ledger posting
Writing-off or adjusting to accounts receivable and the
maintenance of accounts receivable records
Investigating disputes with billing & certified amounts and the
maintenance of accounts receivable records
Reconciling, investigating reconciling items, and posting detail
accounts receivable records

Monitoring
15. Are corrections and adjustments to cash receipts documented and
approved by a senior official?

AUDIT OF SHAREHOLDERS EQUITY

Audit Objectives
To determine:
Proper authorization of transactions involving shareholders equity accounts.
Proper accounting treatment of transactions involving shareholders equity.
Compliance with legal requirements related to corporate capitalization.
Propriety of financial statement presentation and adequacy of disclosures.
Audit Procedures
1. Obtain a copy of the latest articles of incorporation and determine, for each class of share
capital, the authorized share capital; par or stated value; and preferences and limitations, if
any.
2. Obtain a schedule of the share capital, subscribed share capital, and treasury share accounts
indicating the number of shares and amounts for the beginning of year balances; additions
and deductions for the current year; and end of year balances.
3. Foot and cross-foot the schedule
4. Verify accuracy of the schedule
Trace beginning balances to last years working papers or in case of an initial audit,
establish accuracy of beginning balances by test-tracing prior years recordings and
supporting documents and tracing beginning balances to general ledger balances
Trace proceeds to cash receipts records for additional issues or subscriptions to share
capital and reissues of treasury shares.
Trace payments for share capital retirements and acquisitions of treasury shares to cash
disbursements records and canceled checks.
Agree working paper ending balances with the general ledger balances.
Trace authorizations by reference to minutes of meetings of the board of directors and
shareholders.
5. Where the client is being serviced by an independent transfer agent or registrar:
Confirm share capital issued and treasury shares.
Arrange for the inspection and count of treasury shares.
6. Where the client does not maintain an independent transfer agent or registrar:
Obtain from the corporate secretary a schedule of shareholders, subscribers,
subscriptions receivable and treasury shares
Foot and cross-foot the schedule
Test-trace to stock and transfer book
Trace balances per schedule to general ledger balances
Inspect and account for unissued, canceled, treasury shares certificates
Determine if the treasury shares had been properly endorsed in favor of the corporation
7. Confirm subscriptions receivable and consider collectability
8. Review articles of incorporation, by-laws and minutes of meetings of the board of directors
and shareholders relating to share capital and related accounts
9. Obtain schedules of other equity accounts, indicating beginning of year balances, additions
and deductions during the current year; and end of year balances.
10. Foot and cross-foot the schedules
11. Verify accuracy of the schedules
Trace beginning balances to last years working papers or in case of an initial audit,
establish accuracy of beginning balances by test tracing to prior years recordings and
supporting documents and tracing beginning balances to general ledger balances.

For current year transactions, ascertain authorization and determine propriety of

accounting treatment.
Agree working paper ending balances with general ledger balances.

12. Reconcile dividends paid to rates authorized in directors minutes of meetings

13. Ascertain compliance with the requirements of the Securities and Exchange Commission
(SEC) and other regulatory bodies and contractual obligations relating to capitalization of
retained earnings
14. Determine propriety of financial statement presentation and adequacy of disclosures
Internal Control Questionnaire
Date of Examination: As of
Prepared by:
Received by:

Date:
Date:
Yes

No

N/A

Remarks

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Recording
3. Are stock certificates pre-numbered and sequentially issued?

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4. Are unissued stock certificates adequately safeguarded?

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7. Is an accepted method used to estimate compensation expense

related to share-based compensation plans and is this expense
amortized over the vesting period of the plans?

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8. Has management determined that other-than-temporary

impairment of investments exists? If so, has the equity and net
income impact been separated in accordance with generally
accepted accounting principles?

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Separation of Duties and Access Restrictions

1. Is there adequate segregation of the following duties:
a. Approving capital stock and other equity transactions?
b. Issuing, transferring, and cancelling stock certificates?
c. Maintaining detailed stockholder records?
d. Handling cash or issuing official checks?
2. Is access to computerized equity records limited to those with a
logical need for such access?

5. Reconciliations and reviews:

a. Are stock records monitored and periodically reconciled to the
general ledger?
b. Are the reconciliations reviewed by an appropriate supervisory
official?
6. Other checking or processing routines:
a. Are all shares of stock authorized by the institutions charter
and by the board of directors or stockholders, as appropriate?
b. Are appropriations of equity determined as required by
applicable regulations?
c. Are dividends and other equity transactions approved by the
board of directors?
d. Have terms and conditions been established by the board of
directors for shares purchased for retirement or to be held in
treasury?
e. Is a process in place to identify and properly account for
(including classification) other comprehensive income items?
f. Do all entries to income and expense accounts, capital surplus
and retained earnings possess adequate explanations and
authorized approvals?

Regulatory Capital
9. Are responsibilities appropriately assigned for capital planning,
monitoring compliance with capital laws and regulations, and
preparation of call reports?
10. Is regulatory reporting subject to risk assessment?
11. Regarding the capital amounts in call reports or other regulatory
reports:
a. Does the institution prepare and maintain documentation
supporting the capital amounts reported in call reports or other
regulatory reports?
b. Are capital amounts reconciled to subsidiary ledgers, and are
reconciling items supported by appropriate documentation?
c. Do appropriate supervisory personnel review the call reports,
other regulatory reports, and related documentation?
d. Are procedures in place for collecting and reporting by
branches and subsidiaries the amounts needed for regulatory
capital reporting?
e. Does management reassess significant accounting estimates,
risk weightings, classifications, or other subjective
determinations each time a new call report or regulatory report
is prepared?
f. Does management obtain competent outside advice, as
needed, on significant classification or risk weighting questions
when major transactions are executed?
g. Is the regulatory reporting process (Including classifications
and risk weightings) reviewed by the internal audit department,
if applicable?

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