This document contains two sample audit reports that can be used by auditors for assessing and reviewing an organization’s equity compensation process.
Testing involved activities such as evaluating the effectiveness and efficiency of the equity compensation process, determining compliance with relevant company policies and procedures, evaluating and assessing applicable generally accepted accounting principles guidance the company should consider when reporting equity awards, and assessing the adequacy and effectiveness of internal controls.
The following observations were made as a result of testing:
- The equity compensation process is an evolving area that has an extremely high level of visibility and risk for many organizations.
- Independent reviewers do not verify input for option grants or cancellations without access to Equity Edge.
- A critical component of the administration activity is to ensure that all options as granted and approved by the compensation committee are input into the Equity Edge system completely and accurately.
- A critical component of accounting/disclosure activity is to ensure that all variables used by the Equity Edge system are correctly determined and completely and accurately input into the system.