As an auditor, how will you verify application and allotment money received on shares issued for cash?

Auditing and Assurance Revision Questions and Answers

Answer
Verification of application and allotment money received on Shares Issued for Cash shall be carried out as under:
On Application
Verify the amount received along with the applications for shares in the following manner:
 Check entries in the Application and Allotment Book (or Sheets) with the original applications;
 Check entries in the Application and the Allotment Book as regards deposits of money, received with the applications, with those in the Cash Book;
 Vouch amounts refunded to the unsuccessful applicants with copies of Letters of Regret;
 Check the totals columns in the Application and Allotment Book and confirm the journal entry debiting Share Application Account and crediting Share Capital Account.
On Allotment
 Examine Director‟s Minutes Book to verify approval of allotments.
 Compare copies of letters of allotment with entries in the Application and Allotment Book.
 Trace entries in the Cash book into the Application and Allotment Book for the verification of amounts collected on allotment.
 Trace the amount collected on application as well as those on allotment from the Application and Allotment Book into the Share Register.
 Check totals of amounts payable on allotment and verify the journal entry debiting Share Allotment Account and crediting Share Capital Account.



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