Examining auditors’ ability to evaluate the reasonableness of fair value estimates

IF 0.9 Q3 BUSINESS, FINANCE
Sabrina Gong, Yamin Hao, Nam Ho
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引用次数: 0

Abstract

One of the most difficult challenges facing contemporary auditors is evaluating the reasonableness of fair value estimates (FVEs) made by management. Both practitioners and academic studies have shown auditors to be deficient when tasked with assessing FVEs. However, it is not well understood whether the root cause of this deficiency lies in auditors’ lack of knowledge to appropriately evaluate estimates or auditors’ lack of willingness to challenge management. Using the setting of common auditors in M&A transactions, this study empirically examines whether the audit deficiency can be resolved by providing auditors with additional knowledge or willingness. Our results show that common auditors significantly outperform their peers when tasked with assessing the reasonableness of FVEs in purchase price allocations and reducing overallocation to goodwill when managers have incentives to do so. Further, the evidence is consistent with common auditors demonstrating improved performance in challenging information environments, but not in scenarios where risks to auditors may be perceived to be higher. The results suggest that it is their greater asset-specific knowledge that drives mitigation of the audit deficiency and that targeting improvements to knowledge rather than willingness is likely to be more effective in improving auditors’ ability to evaluate FVEs.

审查审计人员评估公允价值估算合理性的能力
当代审计师面临的最严峻挑战之一就是评估管理层做出的公允价值估算(FVE)是否合理。从业人员和学术研究都表明,审计师在评估公允价值估算时存在不足。然而,人们并不清楚这种缺陷的根本原因是审计师缺乏适当评估估计的知识,还是审计师缺乏挑战管理层的意愿。本研究以并购交易中的普通审计师为背景,实证检验了审计缺陷是否可以通过为审计师提供更多知识或意愿来解决。我们的研究结果表明,当管理者有动机评估购买价格分配中财务风险评估的合理性并减少商誉的整体分配时,普通审计师的表现明显优于同行。此外,有证据表明,在具有挑战性的信息环境中,普通审计师的绩效有所提高,但在审计师可能认为风险较高的情况下,普通审计师的绩效并没有提高。研究结果表明,正是普通审计师对特定资产的更多了解推动了审计缺陷的缓解,而针对知识而非意愿的改进可能会更有效地提高审计师评估财务风险评估的能力。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
2.30
自引率
7.10%
发文量
69
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