Chief executive officer compensation can be a material amount andis often scrutinized by regulators, analysts, competitors, and investors. For CEOs of publiclytraded companies, compensation can consist of salary, bonus, stock option grants, or otherstock awards that can be restricted in terms of how long the officers and directors arerequired to hold the stock. The Proxy Statement for the 2012 Annual Meeting for GoldmanSachs reports the following values for 2011 compensation of the chairman and CEO.1. Salary of $2,000,0002. Bonus of $3,000,0003. Restricted Stock Units with a grant date fair value of $10,710,073. The grant date fairvalue is determined based on the closing price-per-share of the common stock onthe NYSE on the date of the grant and includes a 15% liquidity discount to reflectthe transfer restrictions on the common stock.a. Provide at least one audit procedure the auditor would perform to test the chairmanand CEO’s salary. What audit objective is satisfied with this audit procedure?b. Provide at least one audit procedure the auditor would perform to test the chairmanand CEO’s bonus. What audit objective is satisfied with this audit procedure?c. How would the auditor test the fair value of the Restricted Stock Units?d. Why are the presentation and disclosure-related audit objectives so important forstock-based compensation?
Chief executive officer compensation can be a material amount and
is often scrutinized by regulators, analysts, competitors, and investors. For CEOs of publicly
traded companies, compensation can consist of salary, bonus, stock option grants, or other
stock awards that can be restricted in terms of how long the officers and directors are
required to hold the stock. The Proxy Statement for the 2012 Annual Meeting for Goldman
Sachs reports the following values for 2011 compensation of the chairman and CEO.
1. Salary of $2,000,000
2. Bonus of $3,000,000
3. Restricted Stock Units with a grant date fair value of $10,710,073. The grant date fair
value is determined based on the closing price-per-share of the common stock on
the NYSE on the date of the grant and includes a 15% liquidity discount to reflect
the transfer restrictions on the common stock.
a. Provide at least one
and CEO’s salary. What audit objective is satisfied with this audit procedure?
b. Provide at least one audit procedure the auditor would perform to test the chairman
and CEO’s bonus. What audit objective is satisfied with this audit procedure?
c. How would the auditor test the fair value of the Restricted Stock Units?
d. Why are the presentation and disclosure-related audit objectives so important for
stock-based compensation?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
