This is an active project.
Objective(s) of project
To determine how best to approach the development of any possible further fair value auditing guidance.
In December 2007, the IAASB approved ISA 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures.
It was suggested by a few respondents to the exposure draft of proposed ISA 540 (Revised and Redrafted) and the Consultative Advisory Group (CAG) of the IAASB that the IAASB should form a group to assess the potential to develop additional fair value auditing guidance.
The IAASB discussed a draft Terms of Reference for this group and agreed to its formation at the December 2007 meeting.
The Task Force is comprised of interested parties with relevant perspectives and expertise and will consider aspects of the audit of financial statements measured at fair value, including current issues and practice, and make recommendations to the IAASB for matters that require priority attention.
Task Force progress / Board discussions to date
An information gathering meeting was held in February 2008 to obtain input at an early stage from a broad range of individuals familiar with the area of fair value who may have relevant experience and perspectives on the subject. The IAASB discussed the outcomes of this meeting at its March 2008 meeting.
At that time, the IAASB, with the support of its CAG, agreed to conduct a series of interviews inviting auditors to share their experiences from the most recent audit season with the IAASB so that the IAASB could gain input on any challenges that have been encountered.
The Chair and staff of the Fair Value Auditing Guidance Task Force undertook, on behalf of the Task Force, a series of interviews of Big 4 auditors who were significantly involved in fair value issues related to investments during the 2007 and early 2008 period. Some of these auditors had central roles in consultation and review of fair value issues. Others were engagement partners for audits of large entities which had significant investment holdings.
The Fair Value Auditing Guidance Task Force considered the findings from the discussions with auditors and held a follow-up teleconference in July 2008 to gather recommendations from the initial participants about what activities could be pursued, who the audience was for these activities, and whether there was a role for the IAASB to lead or participate in these activities. The IAASB received an update on the Task Force's activities to date at its September 2008 meeting. The members were generally supportive of the proposed actions of the Task Force, and noted that certain of the projects would likely require a formal project proposal developed, depending on the expected outcome (for example, if an International Auditing Practice Statement is to be developed).
The Task Force has also been following the developments of the International Accounting Standards Board's (IASB) expert advisory panel. The IASB's web site includes a draft staff summary of the IASB's expert advisory panel on measurement and disclosure of fair value when markets are no longer active. The summary provides useful guidance for preparers about relevant processes and judgments which may also be useful to auditors.
On October 6, 2008, staff of the IAASB issued an alert to assist auditors by highlighting areas within the ISAs that are particularly relevant in the audit of fair value accounting estimates in times of market uncertainty.
The IAASB will be updated on the Task Force's activities at its December 2008 meeting.