Chief executive officer compensation can be a material amount and is often scrutinized by regulators, analysts,...

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Accounting

Chief executive officer compensation can be a material amountand is often scrutinized by regulators, analysts, competitors, andinvestors. For CEOs of publicly traded companies, compensation canconsist of salary, bonus, stock option grants, or other stockawards that can be restricted in terms of how long the officers anddirectors are required to hold the stock. Publicly traded companiesare required by the Securities and Exchange Commission to providedisclosures about the components of executive compensation in thecompanyâ€™s annual proxy statement.
How would the auditor test the fair value of the stockoption/stock appreciation rights (SAR)?
Why are the presentation and disclosure-related audit objectivesso important for stock-based compensation?

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Solution The auditor can test the fair value of the stock options and stock option appreciation rightsSARs by the examination of the minutes of the meeting of the board of directors in which the SARs were See Answer

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