The auditor gathers evidence about dividends that are declared and paid primarily because of:

Question

Quizplus · Accepted Answer

Dividends that are declared and paid primarily because of concerns with violations of corporate bylaws or debt covenants are of particular interest to the auditor as they could indicate a financial distress situation or a violation of regulations. This could eventually result in an issue with the going concern of the company. Therefore, the auditor is likely to gather evidence and information regarding such dividends to ensure the financial statement users' confidence in the reliability of the financial statements.

The Auditor Gathers Evidence About Dividends That Are Declared and Paid