As we noted a few weeks ago, the PCAOB recently issued a staff consultation paper entitled Auditing Accounting Estimates and Fair Value Measurements. As discussed in this article from Compliance Week associate chief auditor of the PCAOB Barbara Vanich recently provided a high-level summary of the comment letters received in response to the staff consultation paper.
Of the 38 letters received, over a quarter were from accounting firms, with valuation services and specialists contributing four. Highlights of the preliminary PCAOB review are summarized below:
- There was general support among respondents for examining the PCAOB’s existing standards regarding accounting estimates and fair value measurements.
- Respondents identified the wide range of measurement uncertainty inherent in some fair value measures as a topic for further work and collaboration between the PCAOB and other regulators and standard setters.
- In addition to measurement uncertainty, reconsideration of audit procedures when management has retained a valuation specialist was a topic of focus for respondents.
- Respondents highlighted the possibility that different pieces of audit evidence for a particular fair value measurement may be internally inconsistent (i.e., some evidence supporting a given measurement, while some evidence contradicts the same measurement). Additional guidance on weighing such ambiguous evidence is desired.
Check back in here for further updates as the PCAOB standard setting process for fair value measurements continues to unfold.