Assume the client has preferred stock that includes a maturity date at which time the entity is obliged to reacquire the preferred stock. The client has classified the preferred stock as equity and the related annual distributions to stockholders as dividends declared. Select the item that best describes how the auditor will deal with this preferred stock.

A. The classification is correct as it is.

B. The preferred stock dividends should be reclassified as interest expense.

C. The preferred stock should be reclassified to debt and the preferred stock dividends should be reclassified as interest expense.

D. Assure that the preferred stock appears first in priority in the paid in capital section of stockholders equity.