An audit program for the examination of the retained earnings account should include a step that requires verification of the:
A)gain or loss resulting from disposition of treasury shares.
B)market value used to charge retained earnings to account for a two-for-one stock split.
C)authorization for both cash and stock dividends.
D)approval of the adjustment to the beginning balance as a result of a write-down of an account receivable.

Question

Quizplus · Accepted Answer

Verification of the authorization for both cash and stock dividends is essential in auditing the retained earnings account because dividends directly affect retained earnings by reducing the amount available. The authorization process ensures that dividends are properly approved and recorded, impacting the retained earnings balance.

An Audit Program for the Examination of the Retained Earnings