Duties of Auditor regarding the distribution of dividends
The auditor should perform the following duties regarding the distribution of dividend:
2. As stated already if the rate of dividend exceeds 10% of the profits of the year, the company is required to transfer not less than 2.5% of profit to the reserve account. It is the duty of the auditor to verify whether the company has appropriated the profit accordingly and whether the company has obtained any consent from the Central Government in this regard.
3. The auditor should examine the Minutes of the General Meeting and the Board of directors to confirm the amount of dividend recommended by the directors and declared in the general meeting.
4. He should verify the dividend payments with the bank pass book.
5. Register of Members and dividend list are to be compared and the dividend payable to each shareholder is to be verified. If dividend is taxable at the hands of the shareholder, the amount of tax to be deducted at source is to be checked.
6. The auditor should check the dividend warrants surrendered with the dividend paid. He should also check the outstanding dividend warrants with the balance in dividend account.
7. He should see whether company has opened a separate account in a scheduled bank as “Unpaid Dividend Account of “X” Co., Ltd.” and transfer the total amount of dividend remaining unpaid within 30 days from declaration of dividend. The amount is to be transferred to the account within 7 days from the date of expiry of thirty days. The auditor should ensure that the company has followed the above procedure regarding the unpaid/unclaimed dividend.
8. If such dividend remains unclaimed for a period of seven years, it is to be transferred to Investor Education and Protection Fund. The auditor should see whether the provision is duly complied with.