Page 61 - eBook Audit Of Financial Statement Components

• Agree the authorized share capital to the supporting

documents above

• Reconcile the authorized share capital with the

general ledger

ii. Valuation

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.

However, if the share issue is not in the form of cash, we

need be careful in evaluating whether share capital value
is correct or not.

Example: test of valuation assertion in the audit of share

capital

• Obtain the client’s board meeting minutes
• Agree share transactions records to the board

meeting minutes e.g. for the evidence of share issue

• If the share issue is in the form of cash,

• trace the proceed from the share issue to
the cash receipts journal

• vouch the share issue transactions to

supporting documents to make sure that

they are properly and accurately
recorded in capital accounts.

• If the share issue is in the form of non-cash

transactions, make sure that the client has properly

followed an applicable accounting standard, when
recording the share issue.

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