WASHINGTON (Reuters) -- Audit regulators Friday issued an alert on stock option accounting practices, reminding auditors of their obligations if they observe illegal acts in the course of performing audits.

The Public Company Accounting Oversight Board (PCAOB), overseer of public company auditors and created under 2002's Sarbanes-Oxley corporate reform law, reminded auditors to be "alert to the risk that the issuer may not have properly accounted for stock option grants."

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More than 80 companies, mainly high technology businesses that make heavy use of stock options, are under investigation by the Securities and Exchange Commission for possible improper options accounting that may have illegally benefited managers.

The Department of Justice has set up a special task force in northern California, home to Silicon Valley, to examine potential criminal charges.

The PCAOB notice says "the incidence of these ... practices may have substantially decreased" after the implementation of Sarbanes-Oxley, but auditors were reminded that accounting errors for stock options granted before 2002 may still cause serious errors in current financial statements.

Auditors were also reminded that even small misstatements may be seen as significant when related to unlawful acts.

The PCAOB said it issued the alert to address various forms of options backdating. These include "selection of exercise prices based on market prices on dates earlier than the grant date," and "modification of option documentation for purposes of indicating a lower exercise price than the market price at the actual grant date," the alert said.

The PCAOB also addressed the practice of spring-loading which it described as options "purposefully granted ... immediately before the release of information that the issuer believed would be favorable to its share price."

While spring-loading does not necessarily result in accounting errors, the practice "may create legal or reputational risks and raise concerns about the issuer's control environment," the alert warned.

Prosecutors and the SEC last week filed civil and criminal fraud charges against Gregory Reyes, former chief executive of Brocade Communications Systems Inc., in the first formal charges brought against corporate executives in the widening investigation of options grant practices.

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