AUDIT OF SHARE CAPITAL

Almost the first function of a company is to raise capital. Excepting a private company, every other company issues a prospectus, which may be in the abridged form, or a Statement in lieu of Prospectus, before it proceeds to allotment, share capital. The object is to publicly announce the conditions on which allotment will be made, to specify the projects on which the amount raised will be spent (when these have been decided upon in advance) and to specify limits on certain expenses incidental to raising of capital. The receipt of applications for shares and allotment of shares in pursuance thereto are two
important aspects of every issue of capital in so far as these constitute the legal basis of the transactions in the matter of purchase of shares. These, therefore, should receive a careful attention of the auditor. He also must verify that each party, has performed his part of the contract, within the allotted time. The audit of share capital is necessary both on incorporation and afterwards whenever the directors decide to increase the subscribed share capital. However, except when fresh capital has been issued during the year under audit, for verification of capital it is enough if transfers of shares registered during the year are verified and the total number and value of shares held by different shareholders are reconciled with the total paid-up capital of the company.