Files (Information to be obtained/evidence

Audit Procedures Detailed Work Steps

to be gathered)
Check the legal 1. Obtain a copy of the Articles of Incorporation (AOI) and check the corporate life based on incorporation date. Inquire whether company has filed for Articles of Incorporation
amended AOI to extend the corporate life as necessary.
considerations
2. Check whether the company is subject to the following: List of shareholders with their respective percentage of
ownership as of balance sheet date
a. The 1991 Foreign Investment Act (FIA)
There are two negative lists also known as the “Foreign Investment Negative List” which defines the foreign investments which are limited or restricted
by our Constitution and specific laws.

If the industry where the company operates is subject to foreign ownership restriction, obtain list of the shareholders as of balance sheet date, their
respective percentages of ownership and nationality and check whether the entity’s foreign ownership is within the allowable limit. If there is non-
compliance, evaluate the impact on audit and raise to company’s management and those charged with governance.

b. Minimum public float requirements for listed companies Public Ownership Report
In October 2010, the Philippine Stock Exchange (PSE) issued Memorandum No. 2010-0505 amending its rule on minimum public ownership. The
amended rule, which took effect November 30, 2010, requires listed companies to have a minimum public ownership of 10% to avoid being delisted.
Companies whose public ownership falls below 10% are given a 12-month grace period (until November 30, 2011) to comply with the ownership rule. If
the listed company is not able to comply with the 10% rule after the grace period, the PSE will impose penalty.

If the company is a listed company, obtain a copy of the Public Ownership Report that the company has submitted to the PSE Disclosure Department to
support the indicated public ownership percentage. If the prescribed minimum public ownership percentage has not been complied with, obtain an
understanding of the company’s plans or action steps to address the shortfall. Evaluate impact on audit and raise to company’s management and those
charged with governance.

Review of capital 1. Send confirmation request to the transfer agent and registrar (if the third parties maintains the shareholder records) or to the entity's Corporate 1. Transfer agent and registar or Corporate secretary
Secretary (if the entity maintains the shareholder records) to confirm the following: confirmation reply
stock and related 2. Stock and transfer books
accounts - The total number of each class of shares issued and outstanding at the balance sheet date; 3. Minutes of Board of Directors and Stockholders
- Details of any changes in this amount during the year; meeting
- The amount of any subscriptions receivable in respect of shares allotted but not issued;
- Whether any shares are being reserved for future issuance;
- The number of shares outstanding at the record date if dividends have been declared;
- The amount of any unclaimed dividends; and
- A list of principal shareholders for each class of share.

2. If the maintains the shareholder records, on a rotation basis, examine the share certificate book or the detailed records to determine the number of
shares issued and the number of shares held as treasury stock. In addition, we also perform the following:

- Check the serial continuity of unissued share certificates to determine that they are accounted for;
- Check the details of share transactions during the year to minutes of the directors’ meetings to determine that the transactions have
been properly authorized;
- Check the transactions to the share ledger from the supporting documentation;
- Agree totals to the general ledger; and
- Agree details to the confirmation reply from the Corporate Secretary

On occasion, an entity (usually a smaller entity) may not maintain detailed records to support authorized and issued shares, choosing instead to use
standard unnumbered forms of certificates when shares are issued. The absence of a formal record may require us to select alternative procedures to
verify the share capital information. Records relating to the organization (and changes in the organization) of corporate entities may be maintained by
government bodies, and information regarding authorized shares may be obtained from these sources. In such circumstances, information on issued
shares may be obtainable only by confirmations from the owners of the shares or from management.

3. Examine transactions involving changes in equity to determine that they have been authorized and appropriately reflected in the financial statements.

Equity transactions may take many forms (e.g., donated stock, treasury stock, stock dividends and stock splits, employee stock transactions, or capital
reductions), and we refer to the applicable legislation and other authoritative pronouncements when auditing these transactions to determine whether
all requirements, including procedural matters such as whether resolutions were properly passed, have been followed.

Retained earnings 1. If the company is required under SEC Memorandum Circular No. 11, Series of 2008 (Circular) to file the Schedule of Retained Earnings Available for 1. Schedule of Retained Earnings Available for
Dividend Declaration to the SEC, obtain the schedule prepared by the company and review the appropriateness and completeness of the reconciling Dividend Declaration
account items based on the provisions of the Circular. 2. Minutes of Board of Directors and Stockholders
meeting

PH - SEC - MC - sec-
memo-11s2008
retained earnings
2. Trace and for dividend
agree the amounts in the schedule to the audited financial statements and to the relevant working papers.
declaration.pdf
Others 1. Obtain the latest General Information Sheet filed by the company with the SEC and check for any inconsistencies with other information obtained General Information Sheet
from other sources (such as capital stock, list of owners and officers, etc.)