Index [_______]

Equity Audit Program

Entity: Balance Sheet Date:

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FINANCIAL STATEMENT ASSERTIONS

E/O Existence or occurrence
C Completeness
R/O Rights or obligations
V Valuation or allocation
A/CL Accuracy or classification
CO Cutoff

IDENTIFICATION CODES

The letters in the left column labeled “Assertions” indicate

that the audit procedure provides assurance about the
indicated assertions. If the letter appears in a bracket (for
example, [E/O], [C], etc.), the audit procedure only
secondarily provides assurance about the assertion. If an
asterisk (*) precedes a procedure, it is a preliminary step or
follow-up step.
BASIC PROCEDURES
E/O, C, S 1. If not already done, read the directors’ or partners’
R/O, [CO] minutes and note equity transactions authorized.
E/O, C, S 2. Obtain or update an analysis of transactions in equity
R/O, A/CL, accounts (capital stock issued and outstanding,
CO treasury stock, paid-in-capital, dividends, and retained
earnings) during the period under audit.
S a. Check the clerical accuracy of the schedule and
trace the beginning and ending balances to the
working trial balance.
S b. Compare the balances with those of prior periods
or other expectation, considering known changes in
client operations and equity financing activity.
S c. Identify the number of shares held in treasury and
examine certificates.
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E/O, [C], S 3. Test significant transactions included in the analysis of
R/O, V, equity accounts.
A/CL, CO
S a. Examine supporting documents for significant
transactions affecting capital stock, paid-in capital,
contributed capital, or treasury stock. Document
the items tested.
S b. Consider whether such transactions are in
accordance with the entity’s charter, applicable
state regulations, partnership agreement, or other
relevant documents.
S c. Determine that significant entries are accounted
for in the proper period in accordance with GAAP.
S d. Include in the current or permanent workpaper
files abstracts or copies of significant agreements
or other documents examined to evaluate
appropriate accounting.

E/O, C, S 4. Test significant transactions included in the analysis of

R/O, A/CL, retained earnings (or equivalent) account.
CO
S a. Reconcile changes in retained earnings to net
income for the period and other appropriate
transactions included.
b. Scan the retained earnings account and be aware
of unusual transactions that might indicate
improper accounting or use of the tax method of
accounting. These transactions should be identified
for potential adjustments, if appropriate.
S c. Determine that declared and unpaid dividends are
properly recorded.
S d. Determine the authorization of dividend payments
or other types of entries that might affect retained
earnings accounts.
E/O, C, S 5. Obtain an analysis of transactions affecting other
R/O, A/CL comprehensive income for the period, relate the
beginning and ending balances to the trial balance, and
review the propriety of classifications. Agree activity to
testing performed in other audit areas.

E/O, C, 6. Obtain copies of any new company agreements

R/O, A/CL associated with rights or restrictions on any equity
accounts, including any debt agreements, buy-sell
agreements, or related options to buy company stock.
Perform the following procedures:

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a. Review the plan documents and summarize the
provisions of the agreements. Include in the
current or permanent workpaper files abstracts or
copies of significant agreements examined.
b. Determine the nature of the agreement or
provision and its effect on the entity’s equity.
c. Determine the appropriate accounting treatment
for any transactions that might be the result of
such agreements.
d. Determine the amount of equity balances that are
restricted due to provisions in such agreements,
and summarize such amounts for disclosure in the
financial statements.

Concluding Audit Steps

* S 7. Consider the need to apply one or more additional
procedures. The decision to apply additional
procedures should be based on (a) your risk
assessment (b) a consideration of whether information
obtained or misstatements detected by performing
audit procedures or from other sources during the
audit alter your judgment about the assessed risk of
material misstatement (whether caused by error or
fraud), and (c) an evaluation of whether the procedures
performed have provided sufficient assurance. If risks
or other conditions are identified that require an
additional audit response, ensure that those risks or
conditions and your response are documented.
* S 8. Consider whether the results of audit procedures
indicate internal control related matters that are
required to be communicated to management and
others. If so, add to the memo of points for the
communication of internal control related matters.

Conclusion
* S 9. We have performed procedures and obtained audit
evidence sufficient to provide reasonable assurance
about equity (to support our opinion on the financial
statements taken as a whole). The procedures
performed, relevant evidence obtained, and our
conclusions are adequately documented. (If you are
unable to conclude, prepare a memo documenting
your reason and the implications for the engagement,
including the audit report.)

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EXTENDED PROCEDURES (PROCEDURES FOR ADDITIONAL
ASSURANCE)

Test of Stock Transactions

1. Using the analysis of transactions in equity accounts, do
E/O, C, one or more of the following:
R/O, A/CL
a. Determine the number of shares of stock issued and
canceled and compare quantities with the stock
certificate book.
b. Determine that the method used to cancel shares is
adequate to prevent reissuance.
c. Determine that the entity’s name is on the certificates.

Cash Receipts and Payments on Equity Transactions

2. Trace the cash receipts from stock transactions to deposits.
E/O, A/CL
3. Vouch the payments of stock transactions (treasury stock
E/O, A/CL repurchases, dividends).

Tests of Dividends Paid

4. Analytically test the reasonableness of dividends paid
E/O, C, during the year by multiplying the number of shares
A/CL outstanding on the dividend declaration date(s) by the per
share amount of the authorized dividend(s) and compare
the result to the dividends paid amount on the analysis of
transactions in equity accounts obtained previously.
Investigate any significant unexpected difference.

Test of Stock Certificate Book

5. If, based on the consideration of identified fraud risks, a
E/O, C, decision is made to modify procedures related to equity
[R/O] balances, apply the following additional procedures to the
stock certificate book:
a. Reconcile the number of shares outstanding with
certificate stubs and certificates representing unissued,
retired, or treasury shares.
b. Examine unissued shares.
c. Check the numerical sequence of stock certificates.
d. Obtain a representation from the corporate secretary
on the shares.

Confirmation of Equity Transactions

6. If, based on the consideration of identified fraud risks, a
E/O, C, decision is made to modify procedures related to equity
R/O, A/CL transactions, apply the following additional procedures:

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a. Confirm shares held with all stockholders.
b. Confirm dividends received with all stockholders.
c. Document the items selected for confirmation.

Other Procedures for Additional Assurance

7. Other additional procedures (describe):
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