Which of the Following Is the Most Important Consideration of an Auditor

question 44

Multiple Choice

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of an entity's balance sheet?

• A) Changes in the capital stock account are verified by an independent stock transfer agent.
• B) Stock dividends and/or stock splits during the year under audit were approved by the stockholders.
• C) Stock dividends are capitalized at par or stated value on the dividend declaration date.
• D) Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings.

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Definitions:

Contra Account

An account used in the ledger to offset the balance of a related account.

Carrying Amount

The net value of an asset as recorded in the books, which is equal to the asset's original cost minus any accumulated depreciation, amortization, or impairment charges.

Write Off

The reduction of the recognized value of something, often an uncollectable debt or asset.

Accounts Receivable

Amounts due to a company from its customers for goods supplied or services rendered but not yet paid for.