Cumulative preferred stock commonly has priority over common stock with respect to dividend payments and claims on assets during liquidation. If preferred dividends are not paid in one period, they accumulate and must usually be paid before common shareholders receive dividends. Preferred shareholders may also have priority regarding earnings distributions. However, priority over common stock with regard to dilution of shares is not a common feature. Dilution relates to ownership percentage and voting or conversion effects, not the ordinary dividend and liquidation preferences of cumulative preferred stock. Internal auditors reviewing equity instruments should understand rights, preferences, dividend arrears, liquidation priority, and disclosure requirements. Therefore, Option A is the correct exception.