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 by 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.