The salaries of a company's executive employees often tends to be
one of the most intriguing parts of a company's structure. As most are
aware, the CEO of a company makes a ratter hefty salary. The
company that I chose to research is Apple Corporation (AAPL). The
CEO of Apple, a man named Jim cook, had an annual salary of a
whopping $15,682,219 in 2018 with the typical salary of a software
engineer at Apple at this time being only $130,000 (Apple, n.d). Using
this information, it can be determined that the pay ratio of the CEO vs
a software engineer at Apple is a whopping 12:1. There is no reason
as to why the CEO should be this grossly overpaid compared to his
other co-workers.
The term "executive compensation" can be defined as the financial
payments and non-monetary payments allotted to executive level
employees in exchange for providing their service. Every company
has different ways in which they provide compensation to their
executive employees, which are not always monetary (Keeper, 2019).
Some may get a company paid vehicle, but more often than not a
company executive is compensated in company stock. In this method,
the company issues stock at a reduced or fully compensated rate. This
allows for the stockholder to receive financial gain if and when selling
shares of the stock (Chen, 2020). This provides the employee with the
enticement to help assure the business is profitable by motivating
them the ability to grow their financial wealth with the company.
The most effective audit procedure that can be used to identify
executive compensation fraud is to identify the potential risks toward
material misstatements. This can be done by utilizing the PCAOB, also
known as the public company accounting oversight board, a nonprofit
corporation used to oversee the auditors and public companies to
protect investor interests. This group reviews both compensation and
employment contracts with the intention of determining them to be
both free and legal (PCAOB). When using this method the auditor will
have a the information regarding the identified risks as well as if it
related to the company's financial statements,
References:
Apple, INC. Retrieved September 28, 2022, from:
https://www.sec.gov/Archives/EDGAR/DATA/320193/000793125
19004664/d667873ddef14a.htm#toc667873_24
Chen, J. (2020, Feb 5). Stock Option Definition. Retrieved September
28, 2022 from:
https://www.investopedia.com/TERMS/S/STOCKOPTION.asp
Hayes, A. (2020, Jan 29) Stock Compensation Definition. Retrieved
September 28, 2022 from:
https://www.investopedia.com/articles/stocks/07/executive_compe
nsation.asp
PCAOB. Auditing Standard No 12. Retrieved September 28, 2022
from:
https://pcaobus.org/standards/archived/prereorgstandards/pages/a
uditing_standard_12.asp
