Kalinki Supply Company is a small, privately held corporation that manufactures and sells Christmas tree ornaments. The stock book is maintained by the corporate secretary. Treasury stock is kept in a bank safe deposit box. The equity section of the corporation's balance sheet as of December 31, 19X6, the audit date, is shown in the following statement.

There were no capital stock transactions during the year. State the objectives for auditing the equity section. Develop an audit program to audit the equity section of Kalinki Supply Company.

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Common stock, $10 par value, 100,000 shares authorized and issued Paid-in capital Retained earnings- Beginning of year Add-Net income Less-Dividends, $10 per share End of year Less-Treasury stock, 1,000 shares, at cost $5,324,816 419,605 (99,000) $1,000,000 1,000,000 5,645,421 $7,645,421 87,000 $7,558,421