Auditing Challenging Fair Value Measurements: Evidence from the Field

• 成果类型: Article
• 署名作者: Cannon, Nathan H.; Bedard, Jean C.
• 署名单位: Texas State University System; Texas State University San Marcos; Bentley University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51569
• 发表日期: 2017
• 页码: 81-114
• 关键词: inherent risk; Auditors; client; uncertainty; Negotiation; MODEL; misstatements; Justification; assimilation; INFORMATION

摘要

Concern about effective auditing of fair value measurements (FVMs) has risen in recent decades. Building on prior interview-based and experimental research, we provide an engagement-level analysis of challenging FVMs, using quantitative and qualitative data on audit phases from risk assessment to booking adjustments. Challenging FVMs have high estimation uncertainty, high subjectivity, significant/complex assumptions, and multiple valuation techniques. Estimation uncertainty is associated with higher inherent risk assessments, which are, in turn, predictive of client problems identified during the engagement. The use of a valuation specialist by auditors, associated with higher inherent risk and client specialist use, is a key decision: procedures performed by specialists have the highest yield in identifying problems. Auditor-client discussion of an adjustment increases with problem identification and auditors' expressions of residual concern about uncertainty post-testing. However, booked audit adjustments are infrequent; the only factors explaining income-decreasing adjustments are better evidential support and breadth of problems identified.