Preliminary expenses relates to the creation and floating of a company. It comprises stamp duties, registration fees, legal costs, consultants fees, expenses of printing of memorandum and articles etc.
The following are the audit steps to audit/vouch/verify the preliminary expenses:
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Audit Steps For Preliminary Expenses
- Check the Board resolution approving the expenses
- Examine supporting papers and voucher, contracts, agreements etc to support the promoter’s claims.
- Check bills and receipts issued by the printer of the memorandum and articles of association, share certificates, etc.
- Check receipts for the registration fee paid for registration of the company
- Verify rates of stamps required to be affixed on the memorandum and articles of association
- Ascertain Board’s minute book for the decision to write off the preliminary expenses over a period. The quantum thereof which has not been written off for these expenses should be carried forward in the balance sheet under the heading miscellaneous expenditure (to the extent not written off or adjusted) over a period of years
- Check that no expenses other than those that constitute preliminary expenses are booked under this heading e.g. underwriting commission and brokerage fees.
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