Which of the following is the most important audit consideration when examining the stockholders' equity section of a client's balance sheet?
A)Changes in the capital stock account are verified by an independent stock transfer agent.
B)Stock dividends and stock splits during the year under audit were approved by the stockholders.
C)Stock dividends are capitalized at par or stated value on the dividend declaration date.
D)Entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors.

Question

Quizplus · Accepted Answer

Entries in the capital stock account must be traced to the board of directors' minutes to ensure that the transactions are properly authorized. This is considered the most important consideration because it ensures that the transactions are authorized and recorded accurately. While the other options are important, they are not as critical in verifying the accuracy of the stockholders' equity section.

Which of the Following Is the Most Important Audit Consideration