An Auditor Usually Tests the Reasonableness of Dividend Income from Investments

question 22

Multiple Choice

An auditor usually tests the reasonableness of dividend income from investments in stock of public companies by computing the amounts that should have been received by referring to:

• A)comparisons of current-year dividend income with the reported income from prior years.
• B)stock indentures published by corporate transfer agents.
• C)stock ledgers maintained by independent registrars.
• D)annual audited financial statements issued by the investee companies.

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Definitions:

Profit Allocation

The process of distributing a company's earnings among its shareholders, partners, or other stakeholders according to agreed-upon terms.

Preponderance Of Evidence

A standard of proof in civil cases, requiring that a claim be more likely true than not true.

De Jure Corporation

Latin for “lawful corporation” a corporation that has met the mandatory statutory provisions and thus received its certificate of incorporation.

De Facto Corporation

A company that acts like a corporation and enjoys some of its benefits, despite not being duly incorporated according to statutory requirements.