1.

) The usual internal control procedures adopted are proper authorization of equity transactions by the

board of directors and other corporate officers, segregation of duties in handling equity transactions,

and maintenance of adequate accounting records of such transactions.

2.) One of the important assertions in equity audit is existence, which assures that all equity accounts

and equity interests in the financial statements exists. Another is completeness, which assures that

equity interests are recorded in the financial statements. Valuation and Allocation assures the

appropriateness of the amounts of equity accounts in the financial statements. Presentation and

Disclosure assures that there is proper classification and disclosure of equity accounts in the financial

statements.
3.) The usual documents and/or working papers prepared and gathered are the entitys Articles of

Incorporation and minutes of the board of directors meetings, which are included in the permanent

audit file. Auditors working on equity audit identify deficiencies through internal control questionnaires

and narratives. They also use the book of stock certificates and the cash receipts journal as

reconciling items with the general ledger. These are summarized through the auditors analysis of the

SHE.
4.) First is obtaining and verifying equity reconciliation schedule to improve the existence, completeness

and valuation assertions. Second is obtaining and reviewing the minutes of the board of directors

meetings, Articles of Incorporation and other documents and working papers to improve the

existence, completeness, and presentation and disclosure assertions. Third is reviewing the

appropriateness of the accounting for share-based compensations to improve the existence, rights

and obligations, and valuation assertions. Fourth is analyzing the Retained Earnings account and the

appropriateness of the dividends to improve the existence, valuation, and presentation and disclosure

assertions. The last step is reviewing the presentation and disclosure of the equity accounts.
5.) One of the usual challenges encountered in equity audit is the tediousness of such audit that may be

overwhelming on the part of the auditors, with respect to records and documents to examine and

reconcile. This can be solved by compiling them as one, rather than one by one. Another is the

missing documents and working papers necessary in the audit, such as the Articles of Incorporation

and minutes of the meetings of board of directors. This obstacle can be solved through sending

request letters before the commencement of the examination.