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

Question

Quizplus · Accepted Answer

The most important consideration of an auditor when examining the stockholders' equity section of an entity'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 is because stock issuances, stock splits or dividends require board approval and should be recorded properly in the financial statements. Therefore, tracing entries to board resolutions serves as evidence of proper authorization and validation of changes in the capital stock account. Option A is incorrect as while verification of stock transfer agent is a control, it is not the most significant consideration. Option B pertains only to the approval process and does not necessarily ensure accuracy of accounting treatment. Option C is not relevant for examination of stockholders' equity section of an entity's balance sheet.

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