Executive pay has been a topic of discussion in numerous of my accounting and is an important
consideration in any financial statement audit. Executive compensation, also known as executive
pay, refers to remuneration packages specifically designed for business leaders, senior
management, and executive-level employees of a company. It includes benefits such as salaries,
perks, incentives, insurances, etc.
The company I have chosen to analyse is Expedia Group Inc. The CEO of Expedia, Peter Kern,
makes 296,247,749 according to Executive pay watch. He is one of the highest paid CEOs in the
world and he also serves as the Vice Chairman of the Board. Even though expedient has one of the
highest median workers pays with $102,270, the pay ratio still comes out to an astonishing 2897
to 1. In my opinion, I believe compensating executives this amount is not worth it. CEOs and
executives work incredibly hard and may have a specific set of rare leadership skills that are
difficult to find in the market place- just like a quarterback in the national football league. There is
very high demand for people who are capable of being the face of a billion-dollar company and
run it well. However, I would argue that people who are not being compensated the same, work
equally as hard and could probably do the same job. I think the real reason CEO and executive pay
is so high is because companies do not want to send the message that they are led by a weaker
CEO. So, when one company raises the pay of their CEO to be slightly above the average, all the
other companies follow suit and slowly the average executive pay rises. There are several audit
procedures surrounding executive pay that would reduce the risk of material misstatement. For
starters, getting a list of related parties and highly compensated employees is very important for
any audit. If upper management names appear in a loan detail from the company for example the
auditor would want to thoroughly investigate the transaction and make sure it serves a business
purpose. In general, just scanning a list of major transactions for names of highly compensated
employees or related parties is an important audit procedure. Abuse of company assets, zero
interest loans, sketchy related party transactions, and asset misappropriation by a company official
may all be identified through this simple procedure. As the auditor I would also want a thorough
explanation of the company’s process and reasoning for determining executives' pay.
Executive compensation is a frequent topic in the media today. From an auditor's perspective,
executive compensation is an important consideration when it is time to develop the audit plan
and audit strategy. If earnings and revenue are tied to compensation, then there is a risk of
manipulation. Amazon’s CEO, Andrew Jassy’s total compensation for 2021 was $212,701,169.
Most of this compensation was driven by stocks. d The median employee is paid $32,855. d Andrew
Jassy pay ratio was 6,474:1 – the highest pay ratio! (Highest-paid CEOS: AFL-CIO).
I believe that an executive compensation is a way to motivate other members of the company to
grow and to some extent, the CEO can be a role model for many. d I believe that most CEOs are
worth the compensation they make due to the simple fact that they have brought the respective
company to reach milestones. d Ultimately, they are the true decision makers for the company’s
success or failure.
There are various audit procedures to reduce the risks of material misstatements to prevent fraud
and abuse. d According to PCAO auditing standard 12, there are procedures to address the risk of
material misstatements. The auditors should review these procedures and the minutes. d Auditors
should ensure that the authorization policies are properly followed since the CEOs have the
capability to override all decisions. d In addition, there should be some other compensation policies
that auditors can utilize as well to make sure that the executives are being compliant.
References
Highest-paid CEOS: AFL-CIO. AFL. (n.d.). Retrieved September 30, 2022, from
https://aflcio.org/paywatch/highest-paid-ceos
“Company Pay Ratios: AFL-CIO.” AFL, https://aflcio.org/paywatch/company-pay-ratios
(n.d.). What is Executive Compensation? TalentLyft. www.talentlyft.com/en/resources/what-is-
executive-compensation
(2021, December 17). SEC.gov. Waivers of Disqualification under Regulation A and. www.sec.gov/
