On the audit of fair value measurements

Abstract

The importance of the „audit” function in the corporate regulatory framework has monotonically been increasing in the last decade along with the gradual adoption of the Fair Value Accounting (FVA) by accounting regulators across the world. In this revolutionized environment, the auditor’s functional domain, his approach, methodology and the nature of his responsibilities have all been undergoing a metamorphosis. The auditor’s role is moving away from a conventional, mechanized att ester of tangible evidence to the one that exercises an exceedingly judgmental function in a holistic assessment of (sometimes highly subjective) substantiation of the values ascribed to be fair by the entity’s management. Resourceful audit fi rms do have organized training and development mechanisms set in place for their staff to ensure that such staff remain adequately educated and technically equipped in the contemporary aspects of the profession. Nevertheless, the incessant development of complex and innovative fi nancial instruments and novel business practices demanding an application of innovative valuation models and assumptions present an unrelenting challenge (Martin, Rich & Wilks, 2006, 287; Smith-Lacroix, Durocher & Gendron, 2012, 36). ON THE AUDIT OF FAIR VALUE MEASUREMENTS