The amount of subjectivity involved in establishing fair valueestimates can be complex for management responsible for making thefair value measurements and disclosures contained in financialstatements. This is particularly true for fair value measurementsfor which observable market prices are not available. Auditingstandards require auditors to obtain sufficient appropriate auditevidence to provide reasonable assurance that fair valuemeasurements and disclosures are in conformity with accountingstandards, and auditing standards provide guidance for auditingthose measurements and disclosures contained in financialstatements.
a. Visit the PCAOB's web site (pcaobus.org) to identify where inthe PCAOB Auditing Standards guidance is provided for auditing fairvalue measurements and disclosures.
b. PCAOB auditing standards require the auditor to obtain anunderstanding of the entity's process for determining fair valuemeasurements and disclosures. Identify 5 things the auditor shouldconsider when obtaining that understanding.
c. What should the auditor consider when engaging a specialistto perform substantive tests related to fair value assertions?
d. Briefly describe the three types of substantive tests of fairvalue measurements that the auditor may perform.
The amount of subjectivity involved in establishing fair valueestimates can be complex for management responsible for making thefair value measurements and disclosures contained in financialstatements. This is particularly true for fair value measurementsfor which observable market prices are not available. Auditingstandards require auditors to obtain sufficient appropriate auditevidence to provide reasonable assurance that fair valuemeasurements and disclosures are in conformity with accountingstandards, and auditing standards provide guidance for auditingthose measurements and disclosures contained in financialstatements.
a. Visit the PCAOB's web site (pcaobus.org) to identify where inthe PCAOB Auditing Standards guidance is provided for auditing fairvalue measurements and disclosures.
b. PCAOB auditing standards require the auditor to obtain anunderstanding of the entity's process for determining fair valuemeasurements and disclosures. Identify 5 things the auditor shouldconsider when obtaining that understanding.
c. What should the auditor consider when engaging a specialistto perform substantive tests related to fair value assertions?
d. Briefly describe the three types of substantive tests of fairvalue measurements that the auditor may perform.
