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Discuss the internal controls related to owners' equity that are of concern to the auditor.


Discuss the internal controls related to owners' equity that are of concern to the auditor.

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Answer #1

The following internal controls related to owners' equity are of concern to the auditor:

1. Proper authorization of transactions - Material transactions such as issuance of capital stock, purchase of treasury stock, and declaration of dividends are approved by the board of directors of the company. 

2. Proper recordkeeping and segregation of duties - Policies related to preparation of stock certificates and recording capital stock transactions are well defined and the information in the records are internally verified.

3. Independent registrar and stock transfer agent - There should be an independent registrar who will act as a control and prevent any improper issuance of stock certificates. Also, there should be an independent stock transfer agent who will act as a control over the stock records.

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