When a Client Company Does Not Maintain Its Own Capital

question 14

Multiple Choice

When a client company does not maintain its own capital stock records, the auditors should obtain written confirmation from the transfer agent and registrar concerning:

• A)restrictions on the payment of dividends.
• B)the number of shares issued and outstanding.
• C)guarantees of preferred stock liquidation value.
• D)the number of shares subject to agreements to repurchase.

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Definitions:

Debit

An accounting entry that increases asset or expense accounts, or decreases liability, equity, or revenue accounts.

Credit

Amount entered on the right side of an account.

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future.