An Audit Plan for the Examination of the Retained Earnings

question 15

Multiple Choice

An audit plan for the examination of the retained earnings account should include a step that requires verification of the:

• A)Market value used to charge retained earnings to account for a two-for-one stock split.
• B)Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable.
• C)Authorization for both cash and stock dividends.
• D)Gain or loss resulting from disposition of treasury shares.

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Definitions:

Malpractice

Professional misconduct or the failure to exercise the requisite degree of skill as a professional. Negligence—the failure to exercise due care—on the part of a professional, such as a physician or an attorney, is commonly referred to as malpractice.

Uniform Partnership Act

A standardized set of laws adopted by states to govern the formation, operation, and dissolution of partnerships, providing a consistent legal framework across jurisdictions.

Express Agreement

A contract wherein the terms and conditions are stated clearly and explicitly by the parties involved.

Implied Agreement

A contract formed by actions of the parties that indicate a mutual intent to agree, rather than through written or spoken words.