The following questions concern the audit of accounts in the capital acquisition and repayment cycle. Choose the best response.

a. During an examination of a public company, the auditor should obtain written confirmation regarding debenture transactions from the

(1) client's lawyers.

(2) internal auditors.

(3) trustee.

(4) debenture holders.

b. An audit program for the examination of the retained earnings account should include verification of

(1) authorization for both cash and stock dividends.

(2) market value used to charge retained earnings to account for a 2-for-l stock split.

(3) approval of the adjustment to the beginning balance as a result of a write-down of an account receivable.

(4) approval of the adjustment to the beginning balance as a result of a change in the estimated life of certain fixed assets.

c. Where no independent stock transfer agents are employed and the corporation issues its own shares and maintains share records, cancelled stock certificates should

(1) be defaced to prevent re-issuance and attached to their corresponding stubs.

(2) be destroyed to prevent fraudulent re-issuance.

(3) be defaced and sent to the Ministry of Corporate and Consumer Affairs.

(4) not be defaced but segregated from other stock certificates and retained in a cancelled certificates file.