Earlier this month the SEC and the PCAOB had discussed delivering a one-two regulatory punch aimed at curbing backdating violations.
Two days after the Securities and Exchange Commission issued executive-pay-disclosure rules mandating corporations to report on the backdating of stock option grants, the Public Company Accounting Oversight Board has issued guidance to auditors on the same subject.
In putting out Friday's guidance, the PCAOB sounded the alarm for independent auditors to be on the lookout for backdating and other finagling related to the reporting of options-related costs in their clients' financial statements. "Auditors planning or performing an audit should be alert to the risk that the issuer may not have properly accounted for stock option grants and, as a result, may have materially misstated its financial statements or may have deficiencies in its [internal controls over financial reporting]," the PCAOB said in the 9-page guidance it issued Friday, the first in a series of audit-practice alerts.
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