Auditing Fair Values (Portfolio 5403)

Description

Tax Management Portfolio 5403, Auditing Fair Values of Issuers (Accounting Policy and Practice Series), explains and analyzes the rules and best practices for auditing fair values under U.S. and international auditing standards. Principal U.S. auditing procedures for auditors of issuers are prescribed by the Public Company Accounting Oversight Board. Internationally, procedures for auditing fair values are set forth in International Standard on Auditing No. 540 (Revised and Redrafted), Auditing Accounting Estimates Including Fair Value Accounting Estimates and Related Disclosures.

Detailed substantive analysis of fair value accounting deliberately lies beyond the scope of this Portfolio. Readers seeking analysis of the substantive U.S. rules are urged to consult Tax and Accounting Portfolio 5127, Ketz and Zyla, Fair Value Measurements: Valuation Principles and Auditing Techniques (Accounting Policy and Practice Series). However, this Portfolio summarizes fair value accounting to the extent necessary to illuminate users’ understanding of auditing fair values.

The Portfolio describes the major auditing procedures within the framework of three significant steps in the timeline of a typical audit—planning, interim procedures, and year-end procedures. It further explores other essential aspects of auditing fair values that transcend the audit timeline. These subjects include sources of audit evidence, using an expert in auditing fair values, auditing fair values in inactive markets, and issues in auditing fair values that tend to occur in particular industries. The Portfolio also explores auditing sensitive items that generally are applicable to all industries, and it provides numerous sample audit workpapers to augment this discussion. Lastly, it includes examples of how four public companies have disclosed their fair value accounting for particular items.

This Portfolio may be cited as Tax Management Portfolio 5403, Kohlbeck and Zyla, Auditing Fair Values of Issuers (Accounting Policy and Practice Series).

Table of Contents

I. Scope, Focus, and Purpose of Portfolio
II. Fair Value Accounting
III. Fair Value Estimation
IV. Fundamentals of Auditing Fair Values
VII. Year-End Procedures
VIII. Sources of Evidence
IX. Using an Expert in Auditing Fair Value
X. Auditing Fair Values Associated With Illiquid Markets
XII. Industry Specific Issues