Accounting For Equity: Avoiding Pitfalls And Seizing Opportunities This Audit Season

As another audit season approaches, equity accounting—and how it affects the audit—is a perennial hot topic among accounting and financial reporting professionals. Issuing equity and related instruments allows companies to align their economic interests with their employees, vendors, investors, and strategic customers. Due to the variety of structures of equity arrangements, the complexity in the related accounting and reporting, and the systems and processes involved in their issuance, the equity audit can be a source of accounting misstatements, mounting costs, and timing delays. Getting equity accounting right involves the coordination of cross-functional management teams and external service providers, the active management of internal systems, and significant expertise in contract analysis, technical accounting, and financial reporting.