Question

You are beginning your first audit of Suncoast Network Systems, Inc., a company that develops network security software. During your investigation of internal controls you learn that the company’s human resources or finance department has been instructed by the CFO to prepare a list of proposed stock option grant recipients multiple times each quarter. Also, during this investigation, you prepare a table of stock option grants and the dates that the Compensation Committee meets, as shown on the meeting minutes. Remarkably, there has been perfect correlation between the grant dates and the Comp Committee meetings for the last three years. The CFO has signed Sarbanes-Oxley certifications for the last two years’ reports, certifying that the company’s financial reports contained no untrue statements and omitted no material facts and that the financial statements fairly presented in all material respects Sun Coast's financial condition. You suspect the worst.

Required:
What does the evidence point to? You may need to research the rules for stock based compensation.) What additional information do you need to be secure in your suspicions? What are the implications of this for the CFO?



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  • CreatedJanuary 21, 2015
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