How would you verify for Forfeitures and reissue of forfeited shares.

Auditing and Assurance Revision Questions and Answers

For forfeiture of shares, the auditor should:
 Ascertain that the articles authorize the board of directors to forfeit shares and that the power has been exercised the board in the best interest of the company;

 Verify the amount of call or installment of calls which was outstanding in respect of each of the share forfeited;
 Ascertain that the procedure in the articles has been followed;
 Verify that the premium, if any received on the issue of shares has not been transferred to the Forfeited Share Account.

For reissue of forfeited shares, the auditor should:

 Ascertain that the articles authorize the board of directors to reissue forfeited shares;
 Refer to the resolution of board of directors, re-allotting forfeited shares;
 Vouch the amounts collected from person to whom the shares have been allotted and verify the entries recorded from re-allotment and see that the total amount received on the share, including that received prior to forfeiture, is not less than the par value; and
 Verify that computation of the amount of surplus resulting on the reissue of shares credited to the Capital Reserve Account.



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