Detailed below are some individual tests that can be applied in order to help satisfy the objectives noted in Audit objectives. It may not be appropriate to undertake all of the tests; in each case, the auditor should review this bank of tests and determine which are most appropriate for the circumstances of the particular client being dealt with. The auditor should, however, ensure that each objective is satisfied. Where the balance includes accounting estimates, refer to the guidance in Auditing accounting estimates. Show
Auditors need to consider whether they have identified any significant risks in their assessment of the risk of material misstatement. This might apply where, for example: Need help? Get subscribed!To subscribe to this content, simply call 0800 231 5199 We can create a package that’s catered to your individual needs. Or book a demo to see this product in action. Talk to us on live chat Call an Expert: 0800 231 5199  Our sites
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Achu, K. (2013), “Client influence on property valuation: a literature review”, International Journal of Reconfigurable and Embedded Systems, Vol. 8 No. 2, pp. 25-47. Ahn, J., Hoitash, R. and Hoitash, U. (2019), “Auditor task-specific expertise: the case of fair value accounting”, The Accounting Review. doi: 10.2139/ssrn.3192536, available at: https://ssrn.com/abstract=3192536. Bretten, J. and Wyatt, P. (2001), “Variance in commercial property valuations for lending purposes: an empirical study”, Journal of Property Investment and Finance, Vol. 19 No. 3, pp. 267-282. Crosby, N. (2000), “Valuation accuracy, variation and bias in the context of standards and expectations – conference papers”, Journal of Property Investment and Finance, Vol. 18 No. 2, pp. 130-161. French, N. and Gabrielli, L. (2004), “The uncertainty of valuation”, Journal of Property Investment and Finance, Vol. 22 No. 6, pp. 484-500. Hitz, J.-M. (2007), “The decision usefulness of fair value accounting – a theoretical perspective”, European Accounting Review, Vol. 16 No. 2, pp. 323-362. IAASB (2019), “Overview of ISA 540 (revised) and conforming and consequential amendments to other standards, slide show, international auditing and assurance standards board”, available at: https://www.slideshare.net/IFAC_Multimedia/isa-540-revised-overview (accessed 10 January 2019). IFIAR (2014), “International forum of independent audit Regulators (IFIAR) 2013 A nnual report and accounts”, Paris, France, available at: https://www.ifiar.org/?wpdmdl=2104. IFIAR (2015), “International forum of independent audit Regulators (IFIAR) 2014 annual report and accounts”, Paris, France, available at: https://www.ifiar.org/?wpdmdl=2102. ISA 540 (2020), ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures, International Auditing and Assurance Standards Board, IFAC- The International Federation of Accountants, New York. IVS (2011), International Valuation Standards, International Valuation Standards Council, London. Joe, J.R., Vandervelde, S.D. and Wu, Y.-J. (2017), “Use of high quantification evidence in fair value audits; do auditors stay in their comfort zone?”, The Accounting Review, Vol. 92 No. 5, pp. 89-119. Lind, H. and Nordlund, B. (2014), “A transparent two-step categorization of valuation methods”, The Appraisal Journal, Vol. 87, Summer, pp. 244-250. Lorentzon, J. (2011), Att värdera tillgångar – Verkligt värde inom skogs- och fastighetsbranschen (The Value of Assets – Assessing Fair Value of Forest Assets and Investment Properties), Gothenburg University, School of Economics and Commercial Law, Department of Business Administration, Gothenburg. Nellessen, T. and Zuelch, H. (2011), “The reliability of investment property fair values under IFRS”, Journal of Property Investment and Finance, Vol. 29 No. 1, pp. 59-73, doi: 10.1108/14635781111100209. Penman, S.H. (2007) “Financial reporting quality: is fair value a plus or a minus?”, Accounting and Business Research, Vol. 37 No. 1, pp. 33-44, doi: 10.1080/00014788.2007.9730083. RICS (2002), Property Valuation – the Carsberg Report, The Royal Institution of Chartered Surveyors, London. Selling, T.I. and Nordlund, B. (2015), “The problem of management bias in accounting estimates: an investor perspective on root causes and solutions”, Business Horizons, Vol. 58 No. 5, pp. 501-508. Young, M.S., Fisher, J.D. and D'Alessandro, J. (2017), “New NCREIF value index and operations measures”, Journal of Real Estate Literature, Vol. 25 No. 1, pp. 221-235. EPRA (2019), EPRA Best Practices Recommendations Guidelines, European Public Real Estate Association, Brussels. IAS 40 (2020), Investment Property, IFRS – International Financial Reporting Standards, Consolidated without Early Application, International Accounting Standards Board, London. IFRS 13 (2020), Fair Value Measurement, IFRS – International Financial Reporting Standards, Consolidated without Early Application, International Accounting Standards Board, London. What is fair value accounting for investments?9 This Standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
What are the duties of an auditor regarding the valuation of investment?It is the duty of Auditor to confirm that assets and liabilities are appearing in the balance sheet exhibiting their proper and correct value. In the absence of proper valuation of assets and liabilities, they will exhibit either overvalued or under-valued.
What are the proper audit procedures to validate estimates?Auditing standards generally provide three approaches for substantively testing fair value measurements and other accounting estimates:. Testing management's process. ... . Developing an independent estimate. ... . Reviewing subsequent events or transactions.. What factors should an auditor consider in evaluating the reasonableness of accounting estimates?In evaluating whether management has identified all accounting estimates that could be material to the financial statements, the auditor considers the circumstances of the industry or industries in which the entity operates, its methods of conducting business, new accounting pronouncements, and other external factors.
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