Equity compensation is a cornerstone of employee reward systems but managing it effectively can be complex and fraught with risks. This Equity Compensation Review Audit Report is designed to simplify this process, offering a structured approach to evaluating and enhancing equity award administration. With its focus on compliance with FAS 123(R) and other regulatory standards, this tool enables organizations to identify gaps, strengthen controls and achieve operational excellence. It’s a road map to mitigate risks and optimize processes, ensuring your equity compensation programs are both compliant and efficient.

This tool includes two samples, each designed to provide insights into critical aspects of the equity compensation process. Sample 1 focuses on the approval of options, detailing the grant number, employee ID, equity award type and actions taken by the compensation committee. Sample 2 examines historical records related to vesting commencement dates, the number of shares awarded, strike prices, and the timing of these grants. Together, these two samples offer an overview of key controls and potential risks within equity compensation administration, serving as valuable resources for organizations looking to enhance their processes.

Audit findings in this report include:

• A formal and documented independent reconciliation is not performed between the data contained in (Equity System) and the transfer agent records and then appropriately reviewed and approved by senior management.
• A process for monitoring consultant/nonemployee terminations does not exist, which is critical, as consultants/nonemployees are not maintained in the HRIS.
• The company does not have adequate controls in place to address the implications for reporting payroll taxes and other financial reporting and tax requirements related to stock option exercises, repurchased awards or award cancellations.