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Monday, 21 November 2011

Define dividend and what are the duties of auditor relating to dividends

DIVIDENDS :-
The return on investment in share is called dividend. It is the part of the profit earned by the company.
Dividend rate approved in the general meeting by the shareholders.


DUTIES OF AUDITOR RELATING TO DIVIDENDS :-
Following are the important duties of the auditor :

1. Rules Of Company :-
The auditor should check the rules of a company. He should examine that articles of association and companies ordinance allow the management to propose dividends out of revenue profits.

2. Rate Of Dividend :-
The auditor should check that rate of dividend must not be above the rate of profit. It should also not exceed the market rate.

3. Reasonable Profit :-
The auditor should check that amount of revenue profits is reasonable. If it is not reasonable then dividend should not be paid.

4. Account :-
Dividend amount is payable with in the days. The auditor should check that dividend account is opened in the bank or not. The amount equal to dividend must be deposited.

5. Tax :-
It is also the duty of the auditor that he should check the tax payable or dividend is paid to the Govt. or not ? The payment of tax is a legal formality.

6. Not Collected :-
Sometimes shareholders fail to collect the amount from the banks. The auditor should check such amount because it is stated in the balance sheet as liability.

7. Profit & Loss Account :-
The profit and loss appropriation account must be checked by the auditor. He should note the amount of dividend recorded in it.

8. Account Statement :-
The auditor examines that amount of dividend paid and due prepares reconciliation statement of dividend account. He should make detailed checking in case of discrepancy. The errors can be detected.

9. Warrant :-
To register the shareholder management issues dividend warrants. Such amount can be claimed by the shareholders from the bank. The auditor should check these warrants has been issued or not?

10. Check The Decision :-
The auditor should check the directors decision about dividend proposal. He should check the minutes of the directors meeting about the consent of the directors.

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