You are a PA examining the financial statements of Pate Corporation for the year ended December 31. The financial statements and records of Pate Corporation have not been audited by a PA in prior years.

Pate Corporation was founded in 1992. The corporation has 10 shareholders and serves as its own registrar and transfer agent. There are no capital share subscription contracts in effect.

The shareholders' equity section of the balance sheet at December 31 follows:

Shareholder's Equity:

Share capital-10000 no par value, shares authorized; 5000 issued and outstanding $50,000

ContributedCapital32580

RetainedEarnings47320

TotalShareholders'Equity$129,900

Required:

a.A detailed audit program for the examination of the three accounts of the shareholders' equity section of the balance sheet. Organize the audit program under broad financial statement assertions. (Do not include in the audit program the audit of the results of the current year's operations.)

b.After all other figures on the balance sheet have been audited, it may appear that the retained earnings figure is a balancing figure and requires no further audit work. Why don't auditors audit retained earnings as they do the other figures on the balance sheet? Discuss.