Substantive Tests
Not what you're looking for?
17-27 (Substantive tests for stockholders' equity balances) Jones, CPA, the continuing auditor of Sussex, Inc., is beginning the audit of the common stock and treasury stock accounts. Jones has decided to design substantive tests with control risk at the maximum level.
Sussex has no par, no stated value common stock, and acts as its own registrar and transfer agent. During the past year, Sussex both issued and reacquired shares of its own common stock, some of which the company still owned at year-end. Additional common stock transactions occurred among the shareholders during the year.
Common stock transactions can be traced to individual shareholders' accounts in a subsidiary ledger and to a stock certificate book. The company has not paid any cash or stock dividends. There are no other classes of stock, stock rights, warrants, or option plans.
Required:
What substantive tests should Jones apply in examining the common stock and treasury stock accounts?
Purchase this Solution
Solution Summary
This solution gives you the substantive tests that should be applied in examining the common stock and treasury stock accounts
Solution Preview
The common stock account is the stockholders equity account that reports the par or stated value of the issued shares of common stock. On the other hand the treasury stock account shows the stock that is bought back by the issuing company.
The first substantive test is to ascertain from the stock certificate book the number of shares issued and the number of shares reacquired. The difference should be compared with the number of ...
Purchase this Solution
Free BrainMass Quizzes
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.