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Auditing a Publicly Traded Company

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Consider the following scenario: As a Staff I assigned to the audit of a publicly traded company, your senior has asked you to evaluate both share-based payment reporting and special purpose entities (SPE) reporting for the company.

Research share-based payment reporting and SPE reporting, then write an executive memo that includes a description of what you will look for to see if the client is consistent with the generally accepted accounting principles (GAAP). Pay particular attention to accounting treatment of share-based payment and accounting consolidation theory as it relates to special purpose entities. Keep the memo as brief as possible, while fully exploring the issues.

Format your paper according to APA guidelines, including appropriate citations and references.

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Memo:

To: All Executives,

From: Jack Major, Audit Officer, Public Accountants Inc

Date: February 4, 2xxx

Subject: Share-based payment reporting and Special purpose entities reporting

Share based payment means that your company makes payment through an issue of shares. Such payment is made in two cases. First when the payment is made for goods and services received and second shares are given to employees as an incentive. In case the shares are given for goods and service provided, the fair value of the goods and services provided are accounted for as an asset or as an expense. On the other hand if the shares are given as incentives to employees, it becomes necessary to assess the market value of the shares when they are given to them and then to charge the cost over the period during which the benefit vests. Your firm should measure share-based compensation of employee indirectly at fair value of the equity instruments (See IFRS2.11).

When goods or services are received for payment made through shares, these services are recognized as assets, if the goods purchased qualify for recognition as assets or are expensed when your company obtains the goods or when the services are received. (See IFRS2.7 and 2.8). In general services are assumed to be ...

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