Consider the case of backdated stock options as reported in the chapter for UnitedHealth.
a. What happens to the financial statements when options are backdated and the company fails to record compensation expense? Do outsiders receive information that is materially misstated?
b. Describe two management assertions violated when a company fails to record compensation expense related to backdated stock options.
c. Describe a substantive audit procedure that an auditor could use to determine whether financial statements are misstated through backdating of stock options.