Auditing Fair Value Measurements And Other Complex Estimates: A State-Of-The-Art Literature Review And Research Guidelines
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Abstract
The standard setters argue that Financial Accounting Theory is derived from a basically coherent conceptual framework, currently focussed on ‘comprehensive income’ as measured by ‘changes in assets and liabilities’, in turn preferably measured at fair values. Within this regard, it is obvious that fair value measurement has gained so much importance among both financial statement preparers and as well as auditors. To help understand how auditing has evolved within this evolving fair value based accounting world, this study provides a detailed literature review on auditing of fair value accounting measurements and other complex estimates. I splitted the literature into three parts such as association between auditing fair value measurements and audit quality, audit fees and other challanges and constraints on auditing fair value measurements. Besides, this detailed literature analysis is conducted on three dimensions: (1) Fair value accounting and its evolution through standard setters, practitioners and academics, (2) an emphasis on the auditor’s need to understand how fair value measurements are prepared in both reel and financial sector, and (2) the audit steps and procedures necessary to verify and attest to fair value measurements, including an awareness of the potential biases inherent in auditing fair value.
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Abstract
The standard setters argue that Financial Accounting Theory is derived from a basically coherent conceptual framework, currently focussed on ‘comprehensive income’ as measured by ‘changes in assets and liabilities’, in turn preferably measured at fair values. Within this regard, it is obvious that fair value measurement has gained so much importance among both financial statement preparers and as well as auditors. To help understand how auditing has evolved within this evolving fair value based accounting world, this study provides a detailed literature review on auditing of fair value accounting measurements and other complex estimates. I splitted the literature into three parts such as association between auditing fair value measurements and audit quality, audit fees and other challanges and constraints on auditing fair value measurements. Besides, this detailed literature analysis is conducted on three dimensions: (1) Fair value accounting and its evolution through standard setters, practitioners and academics, (2) an emphasis on the auditor’s need to understand how fair value measurements are prepared in both reel and financial sector, and (2) the audit steps and procedures necessary to verify and attest to fair value measurements, including an awareness of the potential biases inherent in auditing fair value.