STU Ltd., a listed company, issued Sweat Equity Shares to certain senior employees during the financial year. While verifying compliance with legal…

CA Intermediate · Auditing and Ethics · MTP · May 2026
STU Ltd., a listed company, issued Sweat Equity Shares to certain senior employees during the financial year. While verifying compliance with legal requirements, the auditor noted the following: The issue was approved by an ordinary resolution passed at the AGM.The resolution mentioned the number of shares and class of employees but did not specify the current market price.The shares issued belonged to a new class of equity shares created specifically for employees.The company complied with regulations issued by Securities and Exchange Board of India for such issuance. Based on the above, which of the following is the most appropriate audit conclusion under Section 54 of the Companies Act, 2013?
(A) The issue is valid since SEBI regulations have been complied with for a listed company
(B) The issue is partially valid since only disclosure of market price is not mandatory
(C) The issue is valid as long as employees have received shares and consideration is properly recorded
(D) The issue is invalid as it is not approved by a special resolution and does not comply with specified disclosure requirements

Suggested Answer and Working Notes:

Correct Answer: Option (D)

The issue is invalid as it is not approved by a special resolution and does not comply with specified disclosure requirements

Topics: Audit of Items of Financial Statements

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic