On May 1, 1999 you were engaged by a committee of shareholders to perform a special audit as of December 31, 1998, of the shareholders' equity of the Major Corporation, whose stock is actively traded on a stock exchange. The shareholders who engaged you believe that information in the shareholders' equity section of the published annual report for the year ended December 31, 1998 is incorrect. If your conclusions confirm their suspicions, they intend to use the report in a proxy fight. Management agrees to permit your audit but refuses to permit any direct confirmation with shareholders. To secure cooperation in the audit, the committee of shareholders has agreed to this limitation, and you have been instructed to limit your audit accordingly. You have been instructed also to exclude the audit of revenue and expense accounts for the year.

Required:

1. Prepare an audit program to audit shareholders' equity, assuming no scope limitations.
2. Describe any special auditing procedures you would undertake given the limitations and other special circumstances you confront in the Major Corporation engagement.
3. Discuss the content of your report for the special engagement, including comments on the opinion that you would issue.