Entries for Dividend Declarations and Retained Earnings Appropriations Are Traced

question 73

Multiple Choice

Entries for dividend declarations and retained earnings appropriations are traced to the minutes book. In determining the propriety of the distribution, the auditor should:

• A) establish that preferential or other rights of stockholders and any restrictions on dividend distributions have been recognized.
• B) establish the number of shares outstanding on the date of record and verify the accuracy of the total dividend declaration by recalculation.
• C) ascertain the propriety of the entry to record the declaration.
• D) review the minutes to provide evidence of stockholders' equity transactions authorized during the year.
• E) trace dividend payments to canceled checks and other documentation.

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Definitions:

Bad Policy

Decision-making or guidelines that result in adverse outcomes or fail to achieve the intended objectives, often criticized for inefficiency or ineffectiveness.

Government Intervention

Actions taken by a government to influence or directly manage an economy, industry, or market, typically with the goal of correcting market failures or achieving social objectives.

Securities Taxes

Taxes levied on the earnings from stocks, bonds, or other investment assets.

Wealth Destruction

The process by which the value of an asset or investment decreases significantly, reducing overall wealth.