To assist auditors in addressing the challenges of auditing fair value accounting estimates, the staff of the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), today released an audit practice alert. The alert was developed following consultation with the IAASB's Task Force on Fair Value Auditing Guidance, which is considering the need for new or modified guidance in light of current marketplace issues.
The purpose of the alert is to highlight areas within the International Standards on Auditing (ISAs) that are particularly relevant in the audit of fair value accounting estimates in times of market uncertainty.
James Sylph, Executive Director, Professional Standards, noted, "Recent events in some of the world's largest financial markets continue to call attention to the difficulties in establishing fair values. This Staff Audit Practice Alert responds to calls from the Financial Stability Forum and others for further guidance on the audit of fair value accounting estimates. I believe this alert will be relevant to auditors of entities of all sizes as they prepare for the next audit season."
The alert also directs auditors to the recently revised ISA 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, which was influenced by the changes in the credit markets during 2007. While not effective until audits of financial periods commencing on or after December 15, 2009, it includes guidance that is likely to be useful to auditors planning their 2008 engagements.
The practice alert, Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment, may downloaded free of charge from the IFAC website (www.ifac.org). For more information on the other IAASB initiatives with regard to fair value, please visit http://www.ifac.org/IAASB/ProjectHistory.php?ProjID=0080.
About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.
