The amount of time spent verifying owners' equity is frequently minimal for private companies because:
A) the few owners all have access to the books so the auditor spends more time on accounts like liabilities, which affect outsiders.
B) there are few if any transactions during the year for the owners' equity accounts, except for earnings and dividends.
C) these companies are so small that it is not necessary to audit the capital section.
D) there is no public interest in these companies.

Question

Quizplus · Accepted Answer

Private companies usually have few transactions related to owners' equity accounts, such as share issuances or repurchases, which are easy to verify. The main changes to these accounts come from earnings and dividends. Therefore, the auditor may spend less time verifying owners' equity and focus more on accounts that affect third parties, such as liabilities or revenue. However, this does not mean that the capital section is not audited at all, especially if there are complex capital structures or changes in ownership during the year.

The Amount of Time Spent Verifying Owners' Equity Is Frequently