17 important duties of an auditor with regard to share transfer audit

Important duties of an auditor with regard to share transfer audit

Besides confirming that the provisions of sections 108, 109, 110, 111 and 112 have been duly complied with and the procedure as laid down above has been followed, the auditor should take the following steps which are considered necessary for the audit of share transfer:

(1) He should examine the Articles of Association as to the procedure to be followed in case of transfer of shares.

(2) It should be seen that due notices have been given to all the transferors and if the application for registration has been made by the transferor in the case of partly paid shares, the provisions of section 110 given above have been complied with.

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(3) He should check the transfer forms and confirm specially that the provisions of section 108 given above have been complied with.

(4) Next, he should examine and verify the signatures of the transferors from their specimen signatures on the original application forms or previous transfer deeds.

(5) It should be seen that none of the transferees is disqualified for holding shares in the company.

(6) He should inspect the Minutes Book of the Board of Directors to ascertain that the transfer is duly approved by the Board.

(7) He should vouch the entries in the Share Transfer Journal on the basis of transfer forms.

(8) He should check the transfer and postings made from the Share Transfer Journal into the Share Register and the Register of Members.

(9) He should cancel the old Share Certificates by a distinctive mark and specially verify the particulars entered on the counterfoils of certificates issued to the transferees.

(10) He should confirm that a duplicate certificate issued in place of the one lost or destroyed has been issued with the consent of the Board of Directors. The fact has to be entered in the duplicate certificate that it is so issued.

(11) It should be seen that share certificates have been issued on printed forms and unused stock of share certificates is being kept under safe custody.

(12) If shares have been issued in the absence of Share Certificates, he should examine the Letters of Indemnity.

(13) If shares mortgaged with some other institutions have been transferred, it is to be ensured that due notices were given to the mortgagees.

(14) In the case of transmissions registered on the death or insolvency of shareholders, the auditor should see:

(i) That the provisions of the Articles have been duly followed.

(ii) That for transmissions on death to any executor, the following documents have to be examined:

(a) Succession Certificate granted by the Court.

(b) Certificate issued by the Controller of Estate Duty to ensure that Estate duty has been paid.

(c) Request from the executor that the shares be entered in his name.

(d) Order of the Court of Insolvency.

(e) The resolution of the Board of Directors in their Minutes Book approving the transmission.

(15) He should see that the Transfer fee is duly received and credited to the Profit and Loss Account. He should also compare it with the number of transfers lodged.

(16) He should confirm that if the registration of the transfers has been refused, due notices are given to the transferor and the transferee within a period of two months as required under section 111 of the Companies Act.

(17) Lastly, he should confirm that in case of shares held by Directors, Managing Agents, Secretaries and Treasurers, the relevant entries in respect thereof have been duly passed.