Kumar Is the Internal Auditor of Tarragon Inc

question 37

Multiple Choice

Kumar is the internal auditor of Tarragon Inc.Kumar wants to put procedures in place to prevent misstatements in owners' equity and ensure proper record keeping.Kumar has suggested that management implement well-defined policies for preparing stock certificates and recording capital stock transactions.What else should Kumar recommend?

• A)independent internal verification of information in the records
• B)having all journal entries in the equity account reviewed by the controller
• C)performing a monthly reconciliation of shareholder's equity
• D)reconciling the dividend payments with the bank statement

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Definitions:

Adjusting Entries

Are journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred, for the purpose of financial reporting accuracy.

Financial Statements

Documents that present an organization's financial activity and current financial condition, including the balance sheet, income statement, and cash flow statement.

Nominal Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.

Account Groups

Classifications of accounts that share common characteristics, used to organize and summarize financial information in the general ledger.