The Client May Use a Variety of Methods to Understate

The client may use a variety of methods to understate liabilities and expenses associated with stock options.These include

A) Recording operating leases as capital leases to avoid putting the liability on the balance sheet.
B) Failing to record interest expense.
C) Changing the interest rate used to expense long-term liabilities to vary the amount of interest expense
D) Failing to disclose special arrangements,such as transactions with special purpose entities.
E) Backdating stock options and failing to record compensation expense for the difference between the market price of the stock at the date of the grant and the price of the stock on the date of the backdating.