What it is
In an ESOP-owned company, one number drives much of the balance sheet: the per-share value set by the independent appraiser. It sets the repurchase obligation or redeemable shares, the compensation expense on shares released and several disclosures. The auditor does not set that value but must evaluate whether the specialist’s work is appropriate audit evidence.
This memo walks through that evaluation: who the specialist is and whom the specialist works for, competence and objectivity, the method and key assumptions, tests of the data, sensitivity of the repurchase obligation, events after the valuation date and the conclusion. It supports the audit of the company, not the plan.
When to use it
- On any audit of a company whose shares are held by an ESOP and valued by an appraiser.
- When the valuation date differs from the balance sheet date and the gap needs to be evaluated.
- When the per-share value moved sharply from the prior year and the change needs explanation.
What’s inside
- Matter and use of the valuation, with where it feeds the statements
- Specialist table: engagement, competence, capability and objectivity
- Understanding of the standard of value, methods, control and marketability treatment
- Assumption table with source, support and evaluation by item
- Sensitivity tests, events after the valuation date, conclusion and sign-off
Standard cited
This template follows AU-C 500 / AU-C 620. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 500 explained.
Questions
Is the appraiser the company’s specialist or the auditor’s?
Usually the trustee engages the appraiser, and the company uses the value in its statements, which makes the appraiser a specialist whose work the auditor evaluates under the standard on audit evidence. If the audit firm hires its own valuation specialist, the standard on the auditor’s specialist applies to that work. The memo has a row for each.
What does the auditor do with the appraiser’s conclusion?
Evaluate it, not redo it. The auditor assesses competence, capability and objectivity, understands the method and assumptions, tests the data given to the appraiser and checks whether the conclusion is reasonable in light of other evidence, including events after the valuation date.
Does this cover the audit of the ESOP plan itself?
No. A plan audit under ERISA has its own requirements, which the benefit plan templates in this library cover. This memo is for the company’s financial statements.
Related templates
- Audit Program: ESOP-Owned Company
- ESOP Leveraged Loan and Shares Released Schedule
- Audit Memo Template (Matter, Evidence, Conclusion)
- Employee Benefit Plan Audit Planning Memo (ERISA)
Last updated 11/05/2026. All free templates.