Statements of Position

Files

Download

Download Full Text (74 KB)

Description

In recent years, generally accepted accounting principles (GAAP) have required entities to significantly increase the use of fair value for measuring, presenting, and disclosing in their financial statements assets, liabilities, and specific components of equity. The business environment and GAAP that apply to the transactions and events in that environment have become more complex. Along with that complexity and the increased use of fair value measurements and disclosures comes an increasing acknowledgment of the importance of fair values in the financial reporting process. The ASB believes that a Statement on Auditing Standards (SAS) providing overall guidance on auditing considerations relating to fair value is needed to address the current and expected needs of practitioners. The proposed SAS, entitled Auditing Fair Value Measurements and Disclosures, establishes general guidance that provides a framework within which the auditor can exercise professional judgment in auditing fair value measurements and disclosures. The proposed SAS does not address specific types of assets or liabilities, transactions, or industry-specific practices. SAS No. 92, Auditing Derivative Instruments, Hedging Activities, and Investments in Securities (AICPA, Professional Standards, vol. 1, AU sec. 332), is an example of such specific auditing guidance. The proposed SAS requires the auditor to: 1. Obtain sufficient competent audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with GAAP. 2. Obtain an understanding of the entity's process for determining fair value measurements and disclosures and of the relevant controls sufficient to develop an effective audit approach. 3. Evaluate whether the fair value measurements and disclosures in the financial statements are in conformity with GAAP. 4. Evaluate management's intent and ability to carry out specific courses of action where relevant to the fair value measurements and disclosures. 5. Evaluate whether the entity's method of measurement is appropriate (this requirement applies where alternative methods for measuring fair value are available under GAAP, or where the method of measurement is not prescribed). 6. Evaluate whether the entity's fair value measurements are applied consistently. 7. Consider whether to use the work of a specialist. 8. Test the entity's fair value measurements and disclosures (based on the assessment of the risk of material misstatement). 9. Determine that the audit committee is informed about the process used by management in formulating particularly sensitive accounting estimates, including fair value estimates, and about the basis for the auditor's conclusions regarding the reasonableness of those estimates. The exposure draft would result in a new SAS that provides guidance to auditors when auditing fair value measurements and disclosures. It does not amend or supersede any existing SASs.

ISBN

ed02-06-28

Publication Date

2002

Relational Format

Book

Keywords

Fair value -- Accounting -- Standards -- United States; Disclosure in accounting; Financial statements -- Standards -- United States

Disciplines

Accounting | Taxation

Comments

Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants; Exposure draft (American Institute of Certified Public Accountants), 2002, June 28

Proposed statement on auditing standards : Auditing fair value measurements and disclosures;Auditing fair value measurements and disclosuses

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.