In an effort to improve consistency in the application of standards relating to audits of the fair value of options granted to employees, the Public Company Accounting Oversight Board staff has issued a set of guidelines.Presented in a question-and-answer format, the guidelines point out risk factors that auditors should be aware of in their consideration of the process for developing a fair value estimate, significant assumptions used in option-pricing models, and the role of specialists in fair value measurement.
PCAOB spokesperson Mike Shokouhi said that as early as last year, the board recognized the need for the guidelines. "During the course of our discussions with auditors and other professionals in the industry, this is a topic that has come up, and it was noted by our previous chief auditor, Douglas Carmichael, at last year's Standing Advisory Group meeting, when we set the agenda for the next year," Shokouhi said.
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