Amazon and their CEO Andrew Jassy, because I was very interested in the fact that last year
Amazon became the leader in the highest pay ratio at 6,474 to 1 with 99.6% of his compensation
being in the form of Stocks. Amazons CEO last year (2021) had a total compensation of
$212,701,169, while the median worker made $32,855.
Executive compensation can be a great tool to motive management as well as allow the board to
guide the company to meet their goals. However there have been studies done showing that CEO
who consistently receive compensation that is higher than the average market has shown a
tendency to become complacent and over confident (Zyung,2022)
It is very important to have internal controls for payroll in place to prevent abuse and fraud for
CEO compensation. These controls should be tested by the auditor to ensure there are no
misstatement. These tests can include testing to see in the company’s payroll records and
authorization align with the terms of the executive compensation stated in their contracts or from
Board meeting notations. The Auditor should give special care to verify that the proper
authorization was made since a CEO has the power to override authorization policies. Another
important test to preform, especially in cases where most of the compensation is in company
stocks (such as with Andrew Jassy) would be to determine the fair value for share-based
payments.
Macy’s as my publicly traded company. Discovered that in 2021 Macy’s executives consist of Elisa
Garcia (CLO), Jeff Gennette (CEO), Adrian Mitchell (CFO), John Harper (COO), Tony Spring (EVP),
and Danielle Kirgan (Other Executive). The average base-pay for the executives was $829,166,67.
The average stock award for the executives equalled $2,163,988.50. It is not hard to see that for
the most part they are all making their real money off stock awards. The only exception John
Harper who received no stock awards. The average employee salary was only $28,037, which is
3000% lower than the executive salaries. In my opinion, I think the compensation is ridiculous
because I have been the “little worker bee” making that small salary. It is the average employees
who end up making the relationships with customers. However, as far as costs and benefits with
executive compensation, to an honest executive it may motivate them to make decisions that will
benefit the company which in turn will benefit them. This is especially true if the awards are given
like bonuses. The downside to the company is that if that find themselves needing to rase capital,
they may need to sell more stock rather than give it away as compensation. The auditor will want
to read the employment and compensation contracts when it comes to executive compensation.
The most effective procedures to make sure that the financial statements have not been misstated
would be to test its completeness to make sure there are no missing transactions, cutoff testing to
make sure that transactions were recorded in the correct period, occurrence testing to make sure
that the transactions occurred, and existence testing to make sure that assets, such as inventory,
exist.
Audit Procedures Definition. (2022, August 3). Retrieved from Accounting Tools:
www.accountingtools.com/articles/audit-procedures.html
Macy's Inc. (n.d.). Retrieved from Salary.com: salary.com/tools/executive-compensation-
calculator/macys-inc-executive-salaries?year=2021
https://aflcio.org/paywatch/highest-paid-ceos
Zyung, T.D. (2022). In retrospect: The influence of chief executive officers’ historical relative pay on
overconfidence. Strategic Organization, Aug 2022, Vol. 20 Issues 3, pg627-651
Messier, W., Glover, S., & Prawitt, D. (2019, October 19). Auditing & Assurance Services: A
systematic approach. McGraw Hill. Retrieved September 15, 2022,
