Fair Value Audit Activities – ISA 545

Author:Marian ANGHELACHE

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DOI:

Keywords:fair value, estimations, preparer specialist, letter of independence, controls specific risks

Abstract:
This ISA addresses audit considerations relating to the measurement, presentation and disclosure of material assets, liabilities and specific components of equity presented or disclosed at fair value în financial statements.\r\n\r\nThe material presented hereinafter follows the steps used în the audit approach: pre-liminary activities, scope and planning the audit work, develop the audit plan, perform the audit plan, conclude and report.\r\n\r\nA series of aspects are highlighted, relevant to both the general framework of the audit approach and certain specific activities to the audit relating to the measurement, presentation and disclosure of the information at fair value.\r\n\r\nAn emphasis is placed on the fact that the auditor should obtain sufficient appropriate audit evidence that fair value measurements and disclosures are în accordance with the entity’s applicable financial reporting framework.\r\n\r\nAs part of fulfilling its responsibility, management needs to establish an accounting and financial reporting process for determining the fair value measurements and disclosures, select appropriate valuation methods, în accordance with the entity’s applicable financial reporting framework\r\n\r\nMany measurements based on estimates, including fair value measurements, are inherently imprecise. în the case of fair value measurements, particularly those that do not involve contractual cash flows or for which market information is not available when making the estimate, fair value estimates often involve uncertainty în both the amount and timing of future cash flows. Assumptions used în fair value measurements are similar în nature to those required when developing other accounting estimates.\r\n\r\nReference is made to the fact that în most financial reporting frameworks, underlying the concept of fair value measurements is a presumption that the entity is a going concern without any intention or need to liquidate, curtail materially the scale of its operations, or undertake a transaction on adverse terms.\r\n\r\nThe measurement of fair value may vary from a relatively simple for certain assets or liabilities, for example, assets that are bought and sold în active and open markets up to more complex. The estimation of fair value may be achieved through the use of a valuation model or through the assistance of an expert.\r\n\r\nThe uncertainty associated with an item, or the lack of objective data may make it incapable of reasonable estimation, în which case, the auditor considers whether the auditor’s report needs modification to comply with ISA 701, Modified Independent Auditor’s Reports.\r\n

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