You are a PA examining the financial statements of Pate Corporation for the year ended December 31. The financial statements and records of Pate Corporation have not been audited by a PA in prior years.
The shareholders’ equity section of the balance sheet at December 31 follows:
Pate Corporation was founded in 1992. The corporation has 10 shareholders and serves as its Shareholders’ equity:
Share capital—10,000 no par value
Shares authorized; 5000 shares
Issued and outstanding ......... $50,000
Contributed capital ......... 32,580
Retained earnings ......... 47,320
Total shareholders’ equity ......... $129,900

Own registrar and transfer agent. There are no capital share subscription contracts in effect.

Required:
a. Prepare the detailed audit program for the examination of the three accounts of the shareholders’ equity section of the balance sheet. Organize the audit program under broad financial statement assertions.
b. After every other figure on the balance sheet has been audited, it may appear that the retained earnings figure is a balancing figure and requires no further audit work. Why don’t auditors audit retained earnings as they do the other figures on the balance sheet? Discuss.