How To Do Audit of ‘Dividend‘

Meaning of Dividend: 

A Dividend is payment made by a Company to its shareholders, usually as a distribution of profit.

Compliance Procedures to be followed – 

1. Whether Section 8 Company? If yes, it is prohibited to declare dividend.

2. Whether BR recommending Dividend is passed?

3. Whether OR has been passed to declare Dividend in AGM?

4. Whether Dividend declared exceeds amount recommended by Board?

5. Check whether provisions of Section 123(6) has been complied with – failure to comply with Section 73 & Section 74.

6. Whether Register of Members is closed as per provisions of Section 91 of Act?

7. Whether amount of Dividend was deposited into separate A/c within 5 days from date of declaration?

8. Whether dividend has been paid in prescribed manner within 30 days of time to registered holder or their order for the compliance of Section 127 of the Act?

9. Whether intimation has been sent to Stock Exchange in case of Listed Company?

Substantive Procedures to be followed-

1. Recalculation –

Recalculate Dividend payable to Shareholders as per provisions of Companies Act, 2013.

2. Reperformance –

• Reperform calculations ensuring amount paid or credited as paid on share in advance of calls is not treated for the purpose of this regulation as paid on the same.
• Reperform calculations ensuring Rule 3 of Companies(Declaration & Payment of Dividend) Rules, 2014 has been complied. i.e. if company is declaring dividend out of accumulated profits,

Ensure that –

 3. Written Representation –

Obtain Written Representation from Management stating Management has complied with Section 123 to Section 127 of Companies Act, 2013