[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1773.43]

[Page 991-992]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1773--POLICY ON AUDITS OF RUS BORROWERS--Table of Contents
 
       Subpart E--RUS Required Audit Procedures and Documentation
 
Sec. 1773.43  Capital and equity accounts.

    (a) Capital stock. For privately owned companies, the workpapers 
must include analyses of all stock transactions during the audit period. 
Based upon the CPA's determination of materiality, an appropriate sample 
of transactions must be selected for testing. The CPA's workpapers must 
document that he/she:

[[Page 992]]

    (1) Reviewed the subsidiary records and reconciled them to the 
general ledger control account;
    (2) Reviewed authorizations and issuances or redemptions of capital 
stock for proper approvals by the board of directors, stockholders, and 
regulatory commissions;
    (3) Determined that transactions were made in accordance with the 
appropriate provisions of the articles of incorporation, bylaws, and RUS 
loan documents; and
    (4) Determined that transactions were recorded in accordance with 
the Uniform System of Accounts.
    (b) Memberships. For cooperative organizations, the workpapers must 
include an analysis of the membership transactions during the audit 
period. Based upon the CPA's determination of materiality, an 
appropriate sample of transactions must be selected for testing. The 
CPA's workpapers must document that he/she:
    (1) Reviewed the subsidiary records and reconciled them to the 
general ledger control account; and
    (2) Determined that transactions were made in accordance with the 
appropriate provisions of the articles of incorporation, bylaws, and RUS 
loan documents.
    (c) Patronage capital, retained earnings, margins, and other 
equities. The workpapers must include an analysis of the patronage 
capital, retained earnings, margins and other equities, and any related 
reserve accounts. Based upon the CPA's determination of materiality, an 
appropriate sample of transactions must be selected for testing. The 
CPA's workpapers must document that he/she:
    (1) Determined that the transactions were made in accordance with 
the appropriate provisions of the articles of incorporation, bylaws, RUS 
loan documents, Uniform System of Accounts, or orders of regulatory 
commissions;
    (2) Traced payments to underlying support; and
    (3) Determined whether, under the terms of the RUS security 
instrument, restrictions of retained earnings or margins are required 
and, if so, whether they have been properly recorded.