ExpertMedium1 markMultiple Choice
CPA · Question 65 · Area III: Performing Procedures
An auditor is testing the 'Completeness' of the dividend income account. Which of the following procedures is MOST appropriate?
An auditor is testing the 'Completeness' of the dividend income account. Which of the following procedures is MOST appropriate?
Answer options:
A.
Vouching recorded dividend receipts to bank deposits.
B.
Reviewing dividend record books (e.g., electronic investment services) to identify dividends declared on securities held.
C.
Confirming the securities held with the custodian.
D.
Recalculating the gain/loss on sale of securities.
How to approach this question
Completeness of Income: Look at what you own -> Look up what it paid -> Check if you recorded it.
Full Answer
B.Reviewing dividend record books (e.g., electronic investment services) to identify dividends declared on securities held.✓ Correct
Reviewing dividend record books (e.g., electronic investment services) to identify dividends declared on securities held.
Standard audit procedure for dividend income is to use an independent source (like Moody's or Standard & Poor's dividend records) to calculate expected dividend income based on shares held and compare it to recorded income.
Common mistakes
Vouching from the ledger (Existence).
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