Items 1 through 6 are common questions found in internalcontrol questionnaires used by auditors to obtain an understanding of internal controlfor owners’ equity. In using the questionnaire for a client, a “yes” response indicates apossible internal control, whereas a “no” indicates a potential deficiency.1. Are all entries in the owners’ equity accounts authorized at the proper level in theorganization?2. Are issues and retirements of stock authorized by the board of directors?3. Does the company use the services of an independent registrar or transfer agent?4. If an independent registrar and transfer agent are not used:(a) Are unissued certificates properly controlled?(b) Are cancelled certificates mutilated to prevent their reuse?5. Are common stock master files and stock certificate books periodically reconciledwith the general ledger by an independent person?6. Is an independent transfer agent used for disbursing dividends? If not, is an imprestdividend account maintained?
Items 1 through 6 are common questions found in internal
control questionnaires used by auditors to obtain an understanding of internal control
for owners’ equity. In using the questionnaire for a client, a “yes” response indicates a
possible internal control, whereas a “no” indicates a potential deficiency.
1. Are all entries in the owners’ equity accounts authorized at the proper level in the
organization?
2. Are issues and retirements of stock authorized by the board of directors?
3. Does the company use the services of an independent registrar or transfer agent?
4. If an independent registrar and transfer agent are not used:
(a) Are unissued certificates properly controlled?
(b) Are cancelled certificates mutilated to prevent their reuse?
5. Are common stock master files and stock certificate books periodically reconciled
with the general ledger by an independent person?
6. Is an independent transfer agent used for disbursing dividends? If not, is an imprest
dividend account maintained?
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