An auditor usually determines whether dividend income from publicly-held investments is reasonable by computing the amounts that should have been received by referring to:

Question

Quizplus · Accepted Answer

Choice "C" is correct. Investment income from dividends is generally recalculated by comparing recorded income with dividend record books produced by investment advisory services such as "Moody's Dividend Record." These books state the dividend that was declared and paid by the investee. Choice "A" is incorrect. Stock ledgers maintained by independent registrars indicate how many shares of stock are issued and outstanding, and identify the shareholders of record, but they do not contain information concerning dividends. Choice "B" is incorrect. Dividend records on file with the SEC would probably include appropriate information, but it is more efficient to use a single source (such as "Moody's") than it is to obtain and review SEC records for each investee. Choice "D" is incorrect. Annual audited financial statements of the investee companies give the total dividends paid, but there may not be enough information to determine exactly how much went to each type of stock and hence to each stockholder. In addition, it is more efficient to use a single source (such as "Moody's") than it is to obtain and review the financial statements of each investee.

An Auditor Usually Determines Whether Dividend Income from Publicly-Held Investments