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:

Wilcoxon Rank-sum Test

A non-parametric statistical test used to compare two independent samples to determine if they come from the same distribution.

Independent Samples

Two or more groups of samples that are not related or connected in any way in the context of an experiment or study.

Relative Frequency Distributions

A distribution where each value is expressed as a relative frequency or proportion of the total number of occurrences.

Normal Approximation

The process of using the normal distribution to approximate the distribution of a sample statistic.