ACCA AAA ^INT Syllabus D. Audit of Historical Financial Information - Auditing SBP - Notes ^{26 / 41}

Those are:

1. Obtain management calculation of the expense and agree the following from the calculation to the contractual terms of the scheme:

   – Number of employees and executives granted options
   – Number of options granted per employee
   – The official grant date of the share options
   – Vesting period for the scheme
   – Required performance conditions attached to the options.

2. Recalculate the expense and check that the fair value has been correctly spread over the stated vesting period.

3. Agree fair value of share options to specialist’s report and calculation, and evaluate whether the specialist report is a reliable source of evidence.

4. Agree that the fair value calculated is at the grant date.

5. Obtain and review a forecast of staffing levels or employee turnover rates for the duration of the vesting period, and scrutinise the assumptions used to predict level of staff turnover.

6. Obtain written representation from management confirming that the assumptions used in measuring the expense are reasonable.

If no market value available for FV

Then we need to audit the model used as follows:

• Review assumptions used, and inputs into the the model (eg.option pricing model) used by management to estimate the fair value of the share options at the grant date

• Consider the appropriateness of the model

• Consider using an expert to provide evidence as to the validity of the fair value used

• Check the sensitivity of the calculations to a change in the assumptions used in the valuation