ASC 820 Fair Value Measurements and Disclosures (previously SFAS 157) provides guidance for auditors and managers to
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a. Identify the three levels of fair value evidence and the nature of audit evidence to be gathered for each level.
b. Ford Motor Company announced in 2008 that it was closing its assembly plant in St. Paul, Minnesota. The one-story plant covered approximately three acres of commercially zoned property close to regular transportation lines.
• What fair value classification is applicable to the plant?
• What is management's responsibility to determine the fair value of the plant?
• If management cannot come up with a good estimate of the fair value of the plant, does Ford have a weakness in its internal controls? Explain.
• Assuming management has an estimate of the fair value of the plant, should the auditor (a) primarily test the methodology used by management to come up with the estimate, or
(b) Hire outside appraisers to provide a fair value estimate of the plant, or
(c) Both?
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Related Book For
Auditing A Business Risk Approach
ISBN: 978-0538476232
8th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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