Review Exhibit and identify inherent risks associated with typical stockholders' equity transactions.
In Exhibit
Inherent Risks Associated with Stockholders’ Equity Activities
Stock Sales and Issuances
Assertion Inherent Risk
Existence Issuances/sales are not authorized in accordance with organization’s bylaws.
Proceeds are not received.
Stock issuances/sales are recorded in the wrong period.
Valuation Stock issued in exchange for goods/services is not properly valued.
Presentation and disclosure Equity activities are not properly disclosed in accordance with GAAP.
Purchase of Treasury Stock
Assertion Inherent Risk
Completeness All stock repurchased is not recorded as treasury stock.
Treasury stock transactions are recorded in the wrong period.
Valuation The cost of treasury stock that is subsequently retired is not properly allocated among the appropriate accounts.
Assertion Inherent Risk
Existence Dividends may be recorded and paid before being declared.
Dividends may not be properly approved before being declared.
Dividends are recorded in the wrong period.
Stock Options and Warrants
Assertion Inherent Risk
Existence Options/warrants are granted without being properly approved.
Inadequate records as to options/warrants issued but not exercised.
Rights/obligations Options exercised or expired remain on the organization’s books.
Valuation Option/warrant grants are not properly valued due to inappropriate assumptions or models.
Inappropriate amortization methods are used.
Inaccurate period of service is used.

  • CreatedSeptember 22, 2014
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