What's a capital verification report?
A capital verification report is a report issued by a CPA firm after it accepts the engagement in accordance with laws to verify the paid-in registered capital or the changes in the registered capital and paid-in capital of the entity being verified.
Capital verification is generally classified into two types: (1) capital verification for incorporation and (2) capital verification for changes. The capital verification for incorporation refers to the verification of the paid-in capital of the entity being verified by a CPA firm at the time of the entity’s application for registration of incorporation. The capital verification for changes refers to the verification of changes in the registered capital and paid-in capital of the entity being verified by the CPA firm at the time of the entity’s application for a change in registration.
The capital verification report has legal effect of certification and is intended for the use by the entity being verified at the time of its application for registration of incorporation or for any changes in registration, and at the time of issuing the certification(s) of capital contributions to the capital contributor(s) accordingly.
What elements make up a capital verification report?
According to Article 22 of the PRC CPA Standards on Auditing No. 1602 - Verification of Capital Contributions, a capital verification report should include the following elements:
- (1) Title: The title of a capital verification report should be uniformly named as "Capital Verification Report".
- (2) Addressee: The addressee of the capital verification report is the recipient to whom the CPA firm sends the capital verification report in accordance with the requirements of the Engagement Letter, which is generally the client of the capital verification engagement.
- (3) Scope paragraph: The scope paragraph of the capital verification report should state the scope of verification, the responsibilities of capital contributor(s) and the entity being verified, the responsibilities of CPAs or CPA firm, the basis for verification and the main verification procedures that have been implemented, etc.
- (4) Opinion paragraph: The opinion paragraph of the capital verification report should state the paid-in status of the registered capital of the verified entity or the changes in the registered capital and paid-in capital.
- (5) Explanatory paragraph: The explanatory paragraph of the capital verification report should state the use of the capital verification report, the responsibility for its use and other important matters considered by the CPAs as necessary to be explained.
- (6) Appendices: The appendices to the capital verification report should include a detailed statement of the paid-in status of the registered capital or a detailed statement of changes in the registered capital or paid-in capital and the notes to the verification of capital contributions, etc.
- (7) Signatures and seals of CPAs: The capital verification report should be signed and sealed by the CPAs who performed the capital verification.
- (8) Name, address and seal of CPA firm: The capital verification report should be attached with the name and address of the CPA firm and stamped with the official seal of the CPA firm.
- (9) Report date: The date of the capital verification report refers to the date on which the CPA firm completes the verification of capital contributions.