In Performing Tests Concerning the Granting of Stock Options, an Auditor

question 46

Multiple Choice

In performing tests concerning the granting of stock options, an auditor should:

• A)confirm the transaction with the Secretary of State in the state of incorporation.
• B)verify the existence of option holders in the entity's payroll records or stock ledgers.
• C)determine that sufficient treasury stock is available to cover any new stock issued.
• D)trace the authorization for the transaction to a vote of the board of directors.

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Definitions:

Impaired Note Receivable

A note receivable that is doubtful to be collected due to the debtor's financial difficulties, necessitating an impairment loss to be recognized.

Contract Interest Rate

The agreed-upon rate of interest in a loan or lease contract, specifying how much interest will be paid on the principal amount.

Market Interest Rate

The prevailing rate of interest available in the market for securities of comparable risk and maturity, influencing how much interest is paid on bonds and loans.

Loan Origination Fees

Charges paid to a lender or broker for processing a new loan application, used as compensation for putting the loan in place.