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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Rights issue of shares audit procedures
Hello,
I am struggling with the following:
“Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the rights issue of shares.”
Are the procedures same as when the shares are issued at premium for outside of the company people?
The overall objective of substantive procedures for a rights issue is essentially the same as a new share issue – both will raise cash for the company.
The main difference is that substantive procedures for a rights issue would involve verifying the eligibility of existing shareholders to participate in the rights issue based on the record date and determining their entitlements to subscribe to the new shares. This would involve reviewing shareholder records, shareholding positions, and ensuring that the rights are allocated correctly based on the proportionate ownership. This would not be relevant in a new share issue.