A survey conducted by the International Forum of Independent Audit Regulators (IFIAR) found that many audits still have significant areas of deficiency, primarily relating to fair value measurement, internal controls testing, and disclosure adequacy. IFIAR members inspected audits at public companies and large financial institutions using the six largest accounting firms (including the Big Four). In many cases, the inspections indicated that the audit firm did not gather enough evidence to support its audit opinion. Among the public companies reviewed, the leading area of deficiency was fair value measurement, which arose in 17% of cases.
Following the 2007-2009 financial crisis, many jurisdictions increased regulation in an attempt to increase audit quality. Regulatory bodies continue to implement new accounting rules. Earlier in April, the European Union implemented new rules limiting the number of years a firm can audit a public company. The United States’ Public Company Accounting Oversight Board (PCAOB) is also contemplating increasing releases of details relating to “critical audit matters” and disclosing individual partner names in order to increase accountability.
Mercer Capital has extensive experience performing fair value measurements that withstand auditor scrutiny and our work is regularly reviewed and accepted by each of the four largest accounting firms and various regulatory bodies.
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Mercer Capital monitors the latest financial reporting news relevant to CFOs and financial managers. The Financial Reporting Blog is updated weekly.