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

Question

Quizplus · Accepted Answer

The most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet is to ensure that entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings. This provides evidence that the capitalization of stock is authorized and legitimate. Verification by an independent stock transfer agent, approval of stock dividends and/or stock splits by stockholders, and capitalization of stock dividends at par or stated value on the dividend declaration date are also important considerations, but are secondary to ensuring that capital stock entries have been authorized by the board of directors.

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