Auditing a Publicly Traded CompanyStudent:Professor:Course title:Date:MEMORANDUMDATE: 25/7/2014FROM: Joy AdamsonTO: Terry Williams, CEO, Bailey & AssociatesSUBJECT: Share-Based Payment reporting and Special Purpose Entities (SPE) reporting The aim of this memo is to provide a description of what as a team we will look to see whether the customer is consistent with the US GAAP. Special attention is paid to accounting treatment of share-based payment, as well as accounting consolidation theory as it relates to SPEs.Share-Based Payments (SBPs) SBPs are essentially those payments given to staff members on the basis of equity or share of the corporation. Share-Based Payments are transactions where the company receives services or goods either as incurring liabilities for amounts basing on the price of the shares of the company or other equity instruments of the company, or as consideration for its equity instruments. The accounting requirements for the SBP is dependent on how the transaction would be settled; that is, by the issuance of (i) cash or equity, (ii) cash, or (iii) equity (Deloitte, 2014). In the accounting treatment of SBPs, share-based payments for the worker’s service will be revenue expenses of the corporation and would transfer to the company’s Profit and Loss (P&L) account. In accounting for share-based payment arrangements under the Generally Accepted Accounting Principles, a fair value-based method is essential whereby a corporation (i) obtains services/goods in exchange for issuing share options or other instruments of equity, or (ii) incurs liabilities which are partly based upon the price of its shares or which might necessitate settlement in its shares (Deloitte, 2014). As per the US GAAP, the fair value of the transaction refers to the amount at which the liability or asset could...