Essential to Both Management and Auditors Is a Chain of Evidence

question 46

Multiple Choice

Essential to both management and auditors is a chain of evidence in the accounting system provided by coding, cross references, and documentation connecting account balances and other summary results with original data. This chain of evidence is referred to as the:

• A) control trail.
• B) vouching or tracing trail.
• C) system reference trail.
• D) audit or transaction trail.
• E) accounting trail.

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Definitions:

Treasury Stock

Shares that were issued and later reacquired by the corporation, reducing the number of outstanding shares in the market.

Common Stock

Shares of ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Cash Dividends

Payments made by a corporation to its shareholders, usually in the form of cash from its profits.

Net Income

The total earnings of a company after deducting all expenses, taxes, and losses from total revenue, indicative of the company's profitability.