The amount of subjectivity involved in establishing fair value estimates can be complex for management responsible for making the fair value measurements and disclosures contained in financial statements. This is particularly true for fair value measurements for which observable market prices are not available. Auditing standards require auditors to obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with accounting standards, and auditing standards provide guidance for auditing those measurements and disclosures contained in financial statements.

Required:

a. Visit the PCAOB's web site (pcaobus.org) to identify where in the PCAOB Auditing Standards guidance is provided for auditing fair value measurements and disclosures.

b. PCAOB auditing standards require the auditor to obtain an understanding of the entity's process for determining fair value measurements and disclosures. Identify 5 things the auditor should consider when obtaining that understanding.

c. What should the auditor consider when engaging a specialist to perform substantive tests related to fair value assertions?

d. Briefly describe the three types of substantive tests of fair value measurements that the auditor may perform.

Answer rating: 100% (QA)

a In the PCAOBS website guidance for auditing fair value measurement and disclosure is discussed in ... View the full answer