As auditors prepare for the 2006 year-end audit season—the first in which stock options will be fully expensed and listed on the balance sheet for all to see—the Public Company Accounting Oversight Board published new “frequently asked questions” guidance to help them through the process.
Tom Ray, chief auditor of the PCAOB, published the 28-page document to help auditors apply existing auditing standards to stock option valuations. So far that exercise has been a walk on eggshells for public companies and auditors alike, since until now stock option expenses were only shown as a footnote disclosure, and how investors will react to more public disclosure is yet unknown.
