An audit plan for the examination of the retained earnings account should include a step that requires verification of the
A) Market value used to charge retained earnings to account for a 2-for-1 stock split.
B) Approval of the adjustment to the beginning balance as a result of a write-down of account receivables.
C) Authorization for both cash and stock dividends.
D) Dividends received from investments.

Question

Quizplus · Accepted Answer

Verification of authorization for both cash and stock dividends is an important step in the audit of retained earnings as it helps to ensure that the distribution of earnings to shareholders is properly authorized and recorded. The other options (A, B, and D) may also be relevant in certain situations, but they are not directly related to the audit of the retained earnings account.

An Audit Plan for the Examination of the Retained Earnings