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Share-based payment transactions involve the issuance of equity instruments such as stocks or options in exchange for goods, services, or other assets. The following are some common audit procedures that auditors may perform to assess the accounting for share-based payment transactions:
Review of the terms of the share-based payment arrangements: The auditor should review the terms of the share-based payment arrangements, including the number of shares or options granted, vesting conditions, and the exercise price.
Assessment of fair value: The auditor should assess whether the fair value of the shares or options granted has been determined in accordance with the relevant accounting standards. This may involve reviewing valuation models used to determine the fair value of the shares or options.
Verification of share-based payment expense recognition: The auditor should verify that the share-based payment expense has been recognized in accordance with the relevant accounting standards. This may involve reviewing the company's calculations of the fair value of the shares or options, the estimated vesting period, and the related share-based payment expense.
Testing of share-based payment disclosures: The auditor should test the company's disclosures related to share-based payments, including a description of the terms and conditions of the arrangements, the impact on earnings per share, and the method used to estimate the fair value of the shares or options.
Review of subsequent events: The auditor should review subsequent events related to share-based payments, including changes in the terms of the arrangements, the exercise of options, and the forfeiture of options.
These audit procedures are designed to provide assurance that the accounting for share-based payment transactions is accurate and in accordance with the relevant accounting standards.
