Which of the following is the most effective audit procedure for verification of dividends earned on investments in marketable equity securities?
A)Tracing deposits of dividend cheques to the cash receipts book.
B)Comparing the amounts received with dividends received in the preceding year.
C)Reconciling amounts received with published dividend records.
D)Re-computing selected extensions and footings of dividend schedules and comparing totals to the general ledger.

Question

Quizplus · Accepted Answer

Reconciling amounts received with published dividend records is the most effective audit procedure for verification of dividends earned on investments in marketable equity securities. This procedure involves comparing the amount of dividend received by the client with the published dividend rates and records, which provides a higher level of assurance regarding the accuracy of the recorded dividend income. Tracing deposits and comparing with the previous year's dividend earned do not provide strong evidence that the dividend income recorded is accurate. Re-computing selected extensions and footings of dividend schedules and comparing totals to the general ledger also do not provide strong evidence of the accuracy of the recorded dividend income.

Which of the Following Is the Most Effective Audit Procedure