Bahasa
Halaman
Hukum
Auditing Complex Fair Value
Measurements: The Battle of Interpretations
Emil Otterskog
Ted Wanning
Stockholm Business School
Bachelor’s Degree Thesis 15 HE Credits
Subject: Business Administration
Spring semester 2020
Supervisor: Gunilla Eklöv Alander
Acknowledgements
We want to say our thanks to everyone who helped us with this thesis. Our supervisor Gunilla
Eklöv Alander who was of tremendous help, our interviewees and everyone who helped us
find possible interviewees. Their efforts were much appreciated in these difficult times with
the Covid-19 pandemic. We would also like to thank our fellow students for contributing
useful feedback, as well as, everyone who helped us proofread the thesis.
Stockholm, June 2020
Emil Otterskog and Ted Wanning
Abstract
Level: Bachelor Thesis in Accounting, 15 HE credits
Date: 2020-06-04 (June 4th, 2020)
Title: Auditing Complex Fair Value Measurements: The Battle of Interpretations
Authors: Ted Wanning, [email protected]
Emil Otterskog, [email protected]
Supervisor: Gunilla Eklöv Alander
Fair Value Accounting is becoming increasingly more prominent, and auditing such
measurements is at times difficult as a great deal of estimates and judgments are involved. This
makes auditors jobs more challenging. Research has found that there is a need for
understanding how auditing standards affect the audit process. Furthermore, some studies have
shown that there is a gap between auditors and inspectors view of what constitutes sufficient
and appropriate audit evidence regarding fair value measurements, the “FVM gap”. The aim
of this study is to provide new insight on how auditing standards and inspectors affect the
judgment of auditors in regards to fair value measurements. This study contributes to audit
standard setters by illuminating how current auditing standards affect auditor judgment when
auditing fair value measurements. It also contributes knowledge on how inspections affect
judgment in the auditing process. Finally, it provides insight to practitioners on how box-
checking and similar tools affect auditor judgment. We performed semi-structured interviews
with respondents who have considerable experience of fair value measurements. The empirical
data was thematically analysed and related to theories on judgment and decision-making as
well as structure versus judgment research. A number of interesting findings were made;
auditing standards seem to be well adjusted to auditors’ needs, documentation is one of the
major issues when dealing with fair value measurements and the toughness of inspections
between countries seem to differ. Some potential topics for future research were identified:
whether or not a gap of interpretations exists between auditors and the lawyers of inspecting
entities, and what effects such a gap could have; if the documentation of both audit clients and
auditors needs to be improved upon. More potential areas for future research can be found in
the Conclusion.
Keywords
Fair Value; Fair Value Measurements; Auditing; Auditing Standards; Audit Inspections;
Judgment; Decision-Making; Structure; FVM Gap
Abbreviations FV - Fair Value
FVMs - Fair Value Measurements
FVA - Fair Value Accounting
FVOEs - Fair Value and Other Estimates
Big 4 - Deloitte, EY, KPMG, PwC
RI - Revisorsinspektionen (The Swedish Audit Inspection)
JDM - Judgment Decision-Making
ISA - International Standards on Auditing
IFRS - International Financial Reporting Standards
US GAAP - US Generally Accepted Accounting Principles
PCAOB - Public Company Accounting Oversight Board
IAASB - International Auditing and Assurance Standards Board
MBS - Mortgage-Backed Securities
Table of Contents
1. Introduction ................................................................................................................................................................. 1
1.1 Background ............................................................................................................................................................. 1
1.2 Previous Research ................................................................................................................................................ 2
1.3 Problematization and Research Question .................................................................................................. 3
1.4 Aim and Contribution ......................................................................................................................................... 4
2. Theory ............................................................................................................................................................................. 5
2.1 Literature Review ................................................................................................................................................. 5
2.1.1 IFRS 13 – Fair Value Measurement ...................................................................................................... 5
2.1.2 ISA 540 – Auditing Accounting Estimates and Related Disclosures ....................................... 6
2.1.3 The Challenges of Auditing FVMs and its Impact on the Audit Process ................................ 7
2.1.4 Regulatory and Legal Influences in regard to Auditing FVMs ................................................... 9
2.1.5 Summary of Previous Research on Auditing FVMs ..................................................................... 10
2.2 Theoretical Framework ................................................................................................................................... 11
2.2.1 Judgment and Decision-Making Expertise ...................................................................................... 12
2.2.2 Structure versus Judgment .................................................................................................................... 13
2.2.3 Theoretical Framework .......................................................................................................................... 15
3. Method ......................................................................................................................................................................... 17
3.1 Ontological and Epistemological Assumptions ...................................................................................... 17
3.2 Research Design .................................................................................................................................................. 17
3.2.1 Data Collection Technique ..................................................................................................................... 17
3.2.2 Sample ............................................................................................................................................................ 18
3.2.3 Operationalization..................................................................................................................................... 19
3.3 Data Analysis ........................................................................................................................................................ 20
3.4 Ethical Reflections .............................................................................................................................................. 21
3.5 Quality Criteria .................................................................................................................................................... 21
3.6 Limitations and Weaknesses ......................................................................................................................... 22
4. Empirical Findings and Analysis ................................................................................................................... 24
4.1 The Complexity of FVMs .................................................................................................................................. 24
4.1.1 An Increased Work Burden ................................................................................................................... 24
4.1.2 What the Focus is Put on When Auditing FVMs ............................................................................ 25
4.1.3 How FVMs Are Handled .......................................................................................................................... 27
4.2 Auditing Standards ............................................................................................................................................ 28
4.2.1 Audit Standard Rigidness and Box-Checking ................................................................................. 29
4.2.2 Differences Between ISA and US GAAS ............................................................................................. 30
4.3 Inspector Influence ............................................................................................................................................ 32
4.3.1 The Role of Inspectors and Revisorsinspektionen ...................................................................... 32
4.3.2 Documentation and Checklists ............................................................................................................. 33
4.3.3 The FVM Gap ................................................................................................................................................ 34
4.3.4 Differences in Inspections Internationally ...................................................................................... 35
4.4 Interplay Between the Complexity of FVMs, Auditing Standards, Inspector Influence, and
its Application on the Framework ...................................................................................................................... 36
5. Discussion .................................................................................................................................................................. 38
5.1 Discussion of Findings ...................................................................................................................................... 38
5.2 Contribution ......................................................................................................................................................... 41
6. Conclusion ................................................................................................................................................................. 43
7. References ................................................................................................................................................................. 45
8. Appendix ..................................................................................................................................................................... 50
1
1. Introduction
In this section we present a short background of the field of research and concisely present
what previous studies have found. With this we introduce the problem that we have identified
and present the research question. We then establish the aim and contribution of this thesis as
well as how we intend to conduct the research.
1.1 Background
“Bailout Plan Rejected, Markets Plunge, Forcing New Scramble to Solve Crisis”
(Lueck et al., 2008)
The 2008 financial crisis saw large parts of the world fall into a deep recession that greatly
affected companies and individuals alike. Mortgage-backed securities (MBS) played a pivotal
role in the continuation of the crisis as loan-takers could not repay what they owed, essentially
making the MBS worthless leading to some banks going belly up (Gilreath, 2018). A largely
debated, contributing factor to the MBS issues was fair values (Pozen, 2009). Fair value1 is a
way of valuing assets held by corporations based on their estimated values as opposed to
observed prices and is as such open to interpretation and debate, which makes the assets value
subject to considerable uncertainty. This uncertainty has proven troublesome in several areas
beyond the financial crisis, especially in the field of auditing (Bell & Griffin, 2012).
Since the inception of fair values, the field of accounting has developed at a rapid pace to see
fair value accounting (FVA) take on an increasingly prominent role. In many ways FVA can
be said to be a “game-changer” in modern financial accounting (Bell & Griffin, 2012). Experts
and decision makers in the field of auditing are forced to revise and review practices, standards
and regulations regarding how to handle FVA in order to stay on par with the changes in the
accounting field (Power, 2010). This has proven to be a great challenge for firms and auditors
alike when dealing with the changing demands of assurance that these complex, fair value
based financial systems impose (Bell & Griffin, 2012).
1 Level 2 and Level 3 inputs which have no/limited active markets to compare with. More on this in the theory
section.
2
1.2 Previous Research
What is it then that makes FVA and FVMs complex? According to Martin et al. (2006) FVMs
often incorporate estimates of future events and are therefore subject to uncertainty and “(...)
an element of judgment is always involved” (p. 289). When dealing with estimates it is often
difficult to get a high level of assurance and even small adjustments to estimated values can
have significant impact on financial statements (Christensen et al., 2012). Bratten et al. (2013)
found that since fair value estimations are carried out according to models and specifications
set by the management of organizations, there is a risk that the assumptions made and models
used are adjusted to suit their personal agendas and incentives.
How does this affect auditors and the auditing process? Martin et al. (2006) and Singh (2015)
established that auditors need to acquire specialised knowledge on FVMs in order to properly
evaluate them in the auditing process. It is reasonable to assume that this is not a trivial task as
Bratten et al. (2013) state that many auditors lack essential knowledge of the FVA methods
employed by their clientele. FVMs also seem to increase the difficulty to make proper risk
assessments amongst auditors. Cannon and Bedard (2017) conducted a study based on
experiences of audit team personnel, in which they examined how the complex nature of FVMs
caused estimation uncertainty to exceed materiality in over 70 percent of the cases studied.
They also found that despite this, in over 30 percent of the cases where estimation uncertainty
exceeded materiality, the auditors only assessed the inherent risk as low to moderate. Bratten
et al. (2013) suggest that a contributing factor to this may be that estimation uncertainty
significantly increases the task difficulty of an FVA audit. One of the measures auditors use to
try to tackle this is seeking expert help from specialists (Martin et al., 2006; Griffith et al.,
2015).
Another issue is that standard setters and practicing auditors seem to not always be on the same
page regarding new standards introduced to address FVMs (Power, 2010; Christensen et al.,
2012). Furthermore, Power (2010) found that when it comes to FVA, auditing standards seem
to have been left behind forcing them to be reactive to changes of accounting standards rather
than proactive. Glover et al. (2019) found a gap between what inspectors and auditors feel is
sufficient evidence for assurance when auditing FVMs and Christensen et al. (2012) add that
new, complicated standards2 hinder auditors’ ability to perform an adequate audit.
2 Christensen et al. (2012) investigated both PCAOB and ISA standards.
3
1.3 Problematization and Research Question
Overall there seems to exist a fair amount of research on the topic of FVMs in auditing (e.g.
Martin et al., 2006; Christensen et al., 2012; Bratten et al., 2013; Cannon & Bedard, 2017).
However, one area that is in need of development, as recognised by Glover et al. (2019), is
whether the way current auditing standards3 are formulated is too ambiguous or rigid, which
may cause issues in the auditing process. Bratten et al. (2013) bring up the fact that auditors in
general seem somewhat adverse to the standards in effect and Christensen et al. (2012) suggest
that further studies on auditors’ views and opinions on how the standards affect audits are of
importance. Furthermore, Glover et al. (2019) state that there is a phenomenon known as the
FVM gap, in which auditors and inspectors have such differing views of what qualifies as
sufficient, appropriate audit evidence when auditing FVMs, that the behaviour of auditors may
change and the quality of audits suffers as a result. For example, they mention that 70 percent
of participants in their study believed that inspectors expected more audit evidence than the
relevant standard required. Glover et al. (2019) note that, since their study was conducted in
America, their findings are tied to the American system and therefore may not be as applicable
internationally. This is another point of inquiry for this thesis; to investigate whether there are
indications of the FVM gap on the Swedish market and what effects inspections may have on
auditors’ judgment, or if different regulatory systems have different implications for the
interpretations made by auditors and inspectors.
This thesis looks into the issue of the FVM gap and the configuration of current audit standards
by hearing from auditors, a valuation specialist, and an inspector in what ways they find current
fair value audit standards affect the auditing of FVMs. Furthermore, how their interactions and
interpretations during inspections affect the audit process and auditor judgment. We attempt to
address these issues and lessen the gap in the understanding of FVM auditing by answering the
question:
What effects do auditing standards and inspectors have on auditor judgment regarding
the audit of FVMs?
3 In our case, we are focusing on ISA 540. More on this in the Theory section.
4
1.4 Aim and Contribution
The overarching aim of this thesis is to shed light on how the potential ambiguities and
deficiencies in current fair value auditing standards affect auditor judgment when auditing
FVMs. Furthermore, to explore the possible gap between auditors’ and inspectors’ ideas of
what qualifies as sufficient audit evidence in a FV auditing context, as described by Glover et
al (2019), and its potential effects on auditor judgment. This is a vital area to explore further in
order to improve the quality of audits including uncertain estimates which are continuously
increasing in frequency in modern accounting (Power, 2010; Bell & Griffin, 2012). This study
may inform standard setters about improvement possibilities in order to increase the
effectiveness, accuracy and level of assurance of audits when FVMs are a major influence.
Other researchers may use this study’s findings to guide them in further studies on topics such
as the FVM gap, and also other areas of potential future research which are suggested in the
Conclusion.
To answer the research question we sought out auditors, an inspector from an inspecting entity4
and a valuation specialist who had experience of working with FVMs. We conducted an
interview study where we asked about FVMs, auditing standards, and inspector influence
which gave us the necessary empirical data needed to address the research question. More on
this in the method section of the thesis.
4 Revisorsinspektionen (RI), the Swedish equivalent to PCAOB.
5
2. Theory
This section has two parts: the literature review and the theoretical framework. In the literature
review we first present the relevant accounting and auditing standards. We then present the
challenges, and the regulatory and legal influences when auditing FVMs. The theoretical
framework is explained, and a figure is added as a visual aid for comprehension.
2.1 Literature review
2.1.1 IFRS 13 - Fair Value Measurement
The standard that regulates FVA is IFRS 13 and it came into effect at the beginning of 2013
(Deloitte, n.d.). IFRS defines FVMs 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.” (IFRS, 2011, p. 5). IFRS 13 has three levels of FVMs (IFRS, 2011) which
are presented and explained in Table 1.
TABLE 1 - Levels of FVMs
Level 1 Inputs Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 Inputs Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3 Inputs Unobservable inputs for the asset or liability.
Level 1 inputs are the most reliable inputs of fair value since there is an active market to obtain
inputs from, one example of a level 1 asset is stocks (IFRS, 2011). Level 2 inputs need to have
an active comparable market or a model that uses inputs from an active market (Deloitte, n.d.).
An example of a level 2 asset is interest rate swaps where the value follows the underlying
interest rates (Liberto, 2019a). Level 3 assets are where it gets more difficult as there is no
observable market and therefore there is an added layer of complexity due to the need of
estimating values (Deloitte, n.d.). Examples of level 3 assets are: mortgage-backed securities
(MBS), private equity shares, and distressed debt (Liberto, 2019b).
6
2.1.2 ISA 540 - Auditing Accounting Estimates and Related Disclosures
ISA 540 covers auditors’ responsibilities in regards to auditing accounting estimates and
related disclosures (IAASB, 2010). It came into effect in December of 2009 and the standard
was revised in October of 20185 6 (IAASB, 2018). The objective of ISA 540 is to establish with
sufficient evidence that FVMs and different estimates are reasonable, and also if the disclosures
in the financial statements are acceptable (IAASB, 2018). The auditor needs to get an
understanding of the company and also its environment and internal control. ISA 540 lists
various items of procedures that auditors need to execute to achieve the necessary knowledge
of the accounting estimates that the entity of audit uses (IAASB, 2018). Auditors needs to
review the outcomes of the accounting estimates and evaluate the degree of estimation
uncertainty connected to them. If they carry the risk of a material misstatement auditors needs
to respond with the correct action (IAASB, 2018).
Since the ISA 540 is quite a substantial standard, it is summarised in Table 2 with the headlines
of the different requirements.7
TABLE 2 - ISA 540 (revised): Requirements
1. Risk Assessment Procedures and Related Activities
2. Identifying and Assessing the Risks of Material Misstatements
3. Responses to the Assessed Risks of Material Misstatements
4. Disclosures Related to Accounting Estimates
5. Indicators of Possible Management Bias
6. Overall Evaluation Based on Audit Procedures Performed
7. Written Representations
8. Communication with Those Charged With Governance, Management, or Other
Relevant Parties
5 Came into force January 2020. 6 ISA 540 and ISA 545 were combined. 7 See more at: https://www.ifac.org/system/files/publications/files/IAASB-ISA-540-Flowchart-
Requirements.pdf and IAASB (2018).
7
2.1.3 The Challenges of Auditing FVMs and the Impact on the Audit Process
FVAs prominence in new standards has been continuously increasing and as such the need for
auditing FVMs has subsequently increased (Martin et al., 2006; Bell & Griffin, 2012). As
previously mentioned, there is an element of judgment involved with FVMs8 and hence, a great
deal of uncertainty (Martin et al., 2006). Christensen et al. (2012) found that in selected public
companies, small changes could impact the FVMs in quantities larger than materiality due to
the high estimation uncertainty. Cannon and Bedard (2017) displayed how high estimation
uncertainty is a difficult problem for auditors; they concluded that in more than 70 percent of
the cases of estimation uncertainty, the uncertainty was larger than materiality. Bratten et al.
(2013) divide the phenomenon estimation uncertainty into two categories, measurement
uncertainty, and macroeconomic risks. When referring to measurement uncertainty, Bratten et
al. (2013) point out the ambiguity of the valuation of an item. There is not a great deal of
measurement uncertainty for Level 1 assets, where there are observable prices, but when
climbing up to Level 2 and Level 3 where models are used to produce the FVMs, measurement
uncertainty increases because of the assumptions made in the models. Folpmers and de Rijke
(2009) demonstrated that the difference in using a Level 2 and Level 3 model on a MBS was
so large that the expected value failed to capture the true risk of the asset. Furthermore, the
macroeconomic risks are a big part of estimation uncertainty since many models of the
complicated FVOEs incorporate estimates of macroeconomic factors. Bratten et al. (2013)
found that in macroeconomic crises, even observed prices may not be considered fair. During
the 2008 crisis the IAASB (2008) told auditors that changing valuation models from price to a
model that would produce a more appropriate value, could be acceptable. Further proof of the
macroeconomic risks with FVMs was found by Vyas (2011), showing that financial institutions
delayed write-downs of securitized assets during the 2008 crisis.
After establishing the fact that there is a great deal of estimation uncertainty in FVMs, it is
important to bring to light what research has found to be the impact on the audit process.
Christensen et al. (2012) found that the complexity and estimation uncertainty of FVMs
resulted in the auditors feeling that they could not give satisfactory levels of assurance.
Similarly, Cannon and Bedard (2017) found that even though a suitable approach was used in
most cases, auditors still felt that they could not give satisfactory assurance. Cannon and Bedard
(2017) found that in over 30 percent of the cases where the estimation uncertainty was larger
8 Level 2 & Level 3.
8
than materiality, the auditors classified the inherent risk as low to moderate. This highlights a
large problem due to the magnitude of the risk and how, in these cases, the inherent risk is rated
far too incautiously by the auditors.
By establishing that fair value and other estimates are complex it is important to know how this
affects auditor judgment and the auditing process. Bratten et al. (2013) list task difficulty as one
factor affecting the audit of FVOEs. Task difficulty is an important aspect to consider because
of how it affects the audit and the auditor. Psychological studies have found that the more
difficult a task is, the greater the negative impact on an individual’s decision-making (Payne et
al., 1997). This is relevant because of the uncertain nature of FVMs, and auditors whose
decision-making is impaired due to the difficulty of the auditing task makes for a lesser quality
audit. The models that are used to generate the FVMs are complex and a more advanced
knowledge of finance may be needed (Bratten et al., 2013), which is why auditors often opt to
use valuation specialists, either internal or external (Bratten et al., 2013; Martin et al., 2006;
Kumarasiri & Fisher, 2011). Bratten et al. (2013) also recognised the difficulties when the
management uses multiple models and how that requires the auditor to also determine whether
the models are weighted appropriately. To accomplish that, the auditor needs to have a great
deal of understanding how the models work, and how or if, they are applicable (IAASB, 2008).
Research has found that auditors often lack the necessary knowledge to tackle the difficulties
of FVMs by themselves (Martin et al., 2006; Kumarasiri & Fisher, 2011) and Griffith et al.
(2015) found this to be partly due to the aftermath of audit firms often dividing knowledge
between auditors and in-house specialists. Consequently, auditors in charge of the audit may
lack the necessary specialised knowledge. This, however, does not necessarily need to be a
major problem since using an in-house specialist is still the same firm doing the work. High
estimation uncertainty was found by Cannon and Bedard (2017) to potentially lead to
disagreements between specialists, and furthermore, Cannon and Bedard (2017) found that
there is a correlation between the use of specialists and the level of inherent and control risk,
but not estimation uncertainty. Further making the point how important it is for auditors to
classify the inherent risk appropriately, which Cannon and Bedard (2017) found to not always
be the case.
9
2.1.4 Regulatory and Legal Influences in regards to Auditing FVMs
When auditing FVMs there is an aspect of regulatory and legal influence. Christensen et al.
(2012) highlight this by showing that the expectations of standard setters seem to have
increased and the limitations have been narrowed. Power (2010) found that whereas FVA keeps
evolving, auditing standards seem to get left behind and are forced to be reactive to new
accounting standards. Bratten et al. (2013) make the argument that a greater regulatory scrutiny
should improve audit quality, but this may not always be the case. During the 2008 crisis
auditors claimed that they followed the rules carefully fearing lawsuits of “Enron-size” and
facing the same destiny as Arthur Andersen (Hughes & Tett, 2008), however, Dickey et al.
(2008) recognised that the core issue of most legal cases was the integrity of the financial
statements and their fair value methodologies. This suggests that greater regulatory discipline
not necessarily always improves audit quality.
In a similar sense, Dowling et al. (2018) found that auditing has shifted further into a “box-
checking”-style of auditing to increase the visibility of compliance to regulatory bodies and
thus avoid scrutiny from inspectors. Power (2009) found that “box-checking” gives both
auditors and inspectors a sense of comfort and Dowling et al. (2018) argue that this could lead
to auditors relying on checklists and failing to contemplate alternative factors. Power (2009)
further argues that the increasing use of checklists leads to standardisation and according to
Dowling et al. (2018) increases the commoditization of auditing. Thus, holding down the
development of knowledge amongst auditors, putting pressure on audit fees and profits while
constricting innovation and development. This may lead to a multitude of negative effects on
the auditor profession, for example graduates avoiding the profession and an increasing
departure of auditors from audit firms (Dowling et al., 2018). Dowling et al. (2018) also found
that audit firms will work proactively to establish mechanisms and routines that minimise the
risk of getting inspected which, as discussed, does not increase audit quality.
Several previous studies (Bratten et al., 2013; Cannon & Bedard, 2017; Glover et al., 2017;
Griffith et al., 2015) take the standpoint that all deficiencies identified by regulators represent
actual deficient auditor performance. However, Glover et al. (2019) find that this view is
incomplete and that it overlooks other perspectives. Peecher et al. (2013) support this
standpoint by finding that regulators and inspectors tend to see a lack of consensus between
auditors and inspectors as evidence of deficient auditor performance. Glover et al. (2019)
present this as the FVM gap, where auditors’ and inspectors’ view of what is sufficient and
10
appropriate evidence when auditing FVMs differ. Glover et al. (2019) find that auditors do
perceive that there is a gap and feel that inspectors often expect more evidence than the audit
standards require, which challenges the authority of auditing standards.
According to Glover et al. (2019) there are four factors that contribute to the disagreement
between inspectors and auditors: (1) high subjectivity and uncertainty rooted in auditing FVMs
with high EU; (2) lack of inspector expertise and judgment bias; (3) differing roles or
affiliations, and incentives between auditors and inspectors; and lastly (4) lack of clear
guidance regarding what constitutes sufficient and appropriate audit evidence. They argue that
the presence of an FVM gap can have unintended negative consequences on audit quality due
to a change in auditor behaviour emerging from the current inspection process.
Glover et al. (2019) recognise that a potentially rewarding area for future research is one that
will shed light on potential needs for revisions to auditing standards, in regards to auditing
complex FVMs. We believe that this study will be able to cover this to a degree. By looking at
how auditors reason about current auditing standards we will help both auditors and regulators
understand what some deficiencies and ambiguities are in current auditing standards of FVMs.
The newly revised ISA 540 is also a hot topic for us and we believe that we can also clarify if,
and how, this impacts the current practices when auditing FVMs.
2.1.5 Summary of Previous Research on Auditing FVMs
Previous research on FVM auditing has found that the prominence of FVA has increased and
thus the need for auditing complex FVMs has increased (Martin et al., 2006; Power, 2010; Bell
& Griffin, 2012; Christensen et al., 2012). Complex FVMs often incorporate judgments and
estimates, thus there is uncertainty involved (Martin et al., 2006; Christensen et al., 2012;
Cannon & Bedard, 2017). Auditors seemingly struggle with these FVMs and were found to
feel that they could not give satisfactory assurance (Christensen et al., 2012; Cannon & Bedard,
2017), sometimes classifying inherent risk as fairly low even though there is considerable
estimation uncertainty (Cannon & Bedard, 2017). The task of auditing FVMs is consequently
complex and auditors sometimes lack the necessary specialised knowledge to tackle the task.
Auditors thus frequently rely on valuation specialists (Bratten et al., 2013; Martin et al., 2006;
Kumarasiri & Fisher, 2011; Cannon & Bedard, 2017; Griffith et al., 2015).
11
When auditing FVMs there are regulatory and legal aspects to consider and Power (2010)
showed how despite FVA evolving, auditors seemingly feel left behind in auditing standards
and are forced to be reactive to changes in accounting standards. Bratten et al. (2013) argue
that a greater regulatory scrutiny should improve the quality of the audit but during the 2008
crisis auditors claimed that they followed the rules (Hughes & Tett, 2008) yet most of the legal
cases revolved around the financial statements and FVMs (Dickey et al., 2008). Dowling et al.
(2018) found that there has been a shift towards more of a box-checking approach in auditing
due to fears of scrutiny from inspectors (Dowling et al., 2018) and box-checking seemingly
gives a sense of comfort (Power, 2009). Box-checking is argued to lead auditors to rely too
much on the lists, failing to contemplate outside aspects (Power, 2009; Dowling et al., 2018).
Glover et al. (2019) found a gap between auditors and inspectors views of what constitutes
sufficient and relevant audit evidence when auditing FVMs. Glover et al. (2019) also
recognised that a potential area for future research is showing and discussing how auditing
standards may need to be revised.
2.2 Theoretical Framework
For this study there was a need for a theoretical base for analysing the empirical data, and one
fundamental aspect of FVMs is judgment. We found two theoretical bases in judgment and
decision-making (JDM) expertise research and structure versus judgment research. The JDM
expertise research exists in both psychology (e.g. Einhorn, 1974; Mumpower & Stewart, 1996;
Weiss et al., 2006) and auditing (e.g. Solomon & Shields, 1995; Peecher et al., 2013) whereas
structure versus judgment mainly covers auditing (e.g. Cushing & Loebbecke, 1986; Bamber
et al., 1989; Francis, 1994; McDaniel, 1990).
The reason we chose JDM expertise research is because of the complexity of FVMs. When
auditing FVMs there is a need for an expert and a need to implement professional judgment to
evaluate the estimations made by the management. The reason we chose structure versus
judgment is because this study also covers the auditing standards part of auditing FVMs. Since
standards structure the way a person carries out a task, it is highly relevant to know how
structure affects the auditing process and its interplay with judgments which is a big part of
FVMs.
12
2.2.1 Judgment and Decision-Making Expertise
Judgment and decision-making (JDM) expertise research has been conducted on both auditing
and other fields such as psychology. The literature emerges from experts having differing
opinions and judgments, especially when faced with complex problems and tasks. We believe
that this can help us tackle and analyse the intricacy of auditing FVMs by showing that experts
do differ in judgments and the JDM expertise literature helps us understand why. Mumpower
and Stewart (1996) argued that the knowing and understanding of why experts have differing
opinions is important to help reduce the gap.
Mumpower and Stewart (1996) found that complex tasks with subjective assessments lead to
differences in experts’ opinions and judgments. Glover et al. (2019) found this to be resonating
with the complexity of FVMs, thus recognising the usefulness of using JDM expertise research
for studies of FVM auditing. Einhorn (1974) studied the psychology behind judgments made
by experts. He wanted to find out whether the experts acted in the same way according to three
criteria: (1) they should show a tendency to cluster variables in the same way, (2) their
judgment should be reliable, and (3) they should weight and combine information in similar
ways. Einhorn (1974) showed that for the first two criteria the experts acted alike but he saw
differences in how they weighted and used information. However, Weiss et al. (2006) discredit
Einhorn (1974) by claiming that the approach of using consistency in judgments is not an
optimal way of measuring expertise. They support this by claiming that a person can be
consistent in how they make judgments but that does not necessarily mean the judgments are
correct. Furthermore, Weiss et al. (2006) claim that the consensus aspect of Einhorn (1974) is
also flawed due to groupthink (Janis, 1972, as cited in Weiss et al., 2006, p. 444), i.e. when the
pressure to conform to a consensus hinders dissenting views and opinions. A consensus does
not mean that the experts are correct and therefore, Weiss et al. (2006) claim that expert
consensus is a flawed approach for evaluating expertise.
Weiss et al. (2006) argue that expertise is hard to measure, and that experience is not a reliable
measure. They assert that experts often have considerable experience, but at the same time,
experience is not a guarantee of expertise. An example is Goldberg (1968, as cited in Weiss et
al., 2006, p. 443) which found that when asking psychologists with varying amounts of
experience, there was no clear association between the experience of the psychologist and their
diagnosis accuracy. Mumpower and Stewart (1996) however, argue that disagreements based
on judgments emanate from either systematic or non-systematic differences in the process in
13
which the judgment was made. Mumpower and Stewart (1996) see four reasons why systematic
differences exist in the judgment process of experts: (1) missing or poor quality feedback, (2)
missing or poor quality information, (3) difficulty in evaluating the quality of one’s own
judgment, and finally (4) causal texture of the environment. Non-systematic differences, on the
other hand, are seen as more of a random occurrence and a product of a concept found by
Hammond and Summers (1972, as cited in Mumpower & Stewart, 1996, p. 197); called
cognitive control, which accounts for judgments not being made with cues in an ideal order or
fashion. The systematic differences are, however, of great interest because of a clear impact on
judgment.
One aspect of Mumpower and Stewart (1996) is that an individual’s self-interest may shape
the way a person judges certain things. For example, an auditor’s or inspector’s self-interest
could affect the way they make judgments during audits or inspections. This can also be
expanded to the interest of one’s organization shapes the way judgments are made. There is
evidence of such occurrences in other fields, such as politics (Mumpower and Stewart, 1996;
Peecher et al., 2013).
2.2.2 Structure versus Judgment
The structure versus judgment debate is the debate of audit methodology and how the audit
process should involve more judgments or a more structured approach. Cushing and Loebbecke
(1989, p. 32), define a structured audit methodology as:
“a systematic approach to auditing characterized by a prescribed, logical sequence of
procedures, decisions, and documentation steps, and by a comprehensive and integrated
set of audit policies and tools to assist the auditor in conducting the audit”. (as cited in
Bamber et al., 1989, p. 286)
Bamber et al. (1989) claimed that audit firms, to improve audit quality and efficiency,
embraced a more structured audit process. They used Cushing and Loebbecke (1986) as the
foundation for their study to ascertain the association between the degree of structure in the
auditing approach, and auditor’s role conflict and ambiguity experienced (Bamber et al., 1989).
While Cushing and Loebbecke (1986, as cited in Bamber et al., 1989, p. 290) used a
institutional approach with interviews, Bamber et al. (1989) used a questionnaire to compare
structured and unstructured audit firms. They found that auditors from structured firms tended
14
to perceive their task as more analysable than auditors from unstructured firms. They also found
that auditors from structured firms perceived that there was a great degree of formalization of
standard practices, policies, and responsibilities. They also showed lower levels of role conflict
than auditors from unstructured firms (Bamber et al., 1989).
McDaniel (1990) also recognised how structure helped auditors. With a quantitative study
McDaniel (1990) researched the implications of time constraints and structure to audit
programs, and the results indicate that there are possible benefits of structure when it comes to
consistency, for example in “making global judgments about sample sizes” (p. 283). At a more
relaxed time constraint level the structure audit program test group had significant increases in
audit effectiveness, efficiency, and consistency. However, just how much consistency that can
be derived from such structures seems to depend on the nature of the current task at hand for
an auditor. McDaniel (1990) also discusses that structured audit programs may not always lead
to the sought-after effects. More specifically9, McDaniel (1990) points out that since the
experiment is based on testing details-tasks it may be less applicable on more complex,
unstructured tasks that include multiple components and require more judgment. Pentland
(1993) expanded on the judgment part by showing that previous studies on judgment always
viewed it as a cognitive process, leaving no room for gut-feel which Pentland (1993) found to
be critical throughout the audit process. Pentland (1993) puts this as the relationship between
the “micro-level behaviour of the engagement team and macro-level context in which they
work” (p. 605). Auditors not only have to form a cognitive connection to their work but also
an emotional one and the way an audit team seems to achieve this is through a sense of comfort
which is obtained by following a ritualistic process. Pentland (1993) further discussed how
trying to, in a purely rational sense, describe auditor's judgment via a rule-abiding system is
insufficient because for any given rule there needs to be a contemplation of when and how to
apply it which in turn requires more rules.
Francis (1994) contributes to the structure versus judgment debate, claiming that “merely
following rules10 is not inherently virtuous because it does not involve reflection on and choice
over one's actions” (p. 263). Francis (1994) is concerned that the rational, technocratic
approach11 compromises the ability of the moral good to develop in auditors as it increasingly
9 And most relevant to this thesis. 10 Such as structured audits. 11 I.e. introducing more rigid standards in auditing.
15
colonises their mindspace. According to Francis (1994); in order for an auditor to do good work
he needs to execute a “self-consciously hermeneutical or interpretative practice” (p. 235) with
a good amount of self-reflection on the work that one does and the goodness that it comprises.
2.2.3 Theoretical Framework
FIGURE 1 - Theoretical Framework
The theoretical framework is thus illustrated in Figure 1. The framework aims to explain how
the complexities of FVMs affect auditors’ judgment when auditing FVMs. This is done by
applying two theoretical foundations, the JDM Expertise research, and the Structure versus
Judgment research. Whereas JDM expertise focuses on how and why experts make different
judgments, structure versus judgment focuses on the balance between the two factors. In both
theoretical foundations there are two aspects of inspector influence and auditing standards.
These were chosen based on the problem this thesis seeks to address; the issue of how, in terms
of auditor judgment, current auditing standards potentially are limiting the work of auditors, as
well as, the issue of the gap in interpretations between auditors and inspectors.
Auditing standards are relevant as a factor because they structure the audit process. They
constitute the foundation of how an audit team ought to approach evaluating FVMs in their
clients financial reports. The crux is that FVMs often are subjective and therefore auditors need
to be able to exercise judgment when looking at models and estimates (Bratten et al., 2013).
The issue that arises is the balance between rigidness of standards and the leeway to interpret
16
made available to auditors. We analyse this by taking previous research on the interplay
between structure and judgment and making it one of the two theoretical viewpoints of the
framework.
Inspector influence is another aspect that we argue is relevant as inspections impact the audit
process, especially when working under the assumption that auditors and inspectors potentially
do not share a consensus regarding how to interpret and apply auditing standards (Glover et al.,
2019). Expert opinions may differ for several reasons and we will analyse the supposed FVM
gap. By interviewing both auditors and an inspector this study aims to uncover some hidden
causes for differing opinions with the help of JDM expertise research and judgment versus
structure research.
17
3. Method
In this section we present the research method used to conduct this study. We give a summary
of the arguments for the choices made as well as an account of sampling and techniques used.
We start off by discussing the methodological stances taken, followed by the research design,
data analysis and reflections on the ethical and procedural limitations of the thesis, as well as,
the quality assurances.
3.1 Ontological and Epistemological Assumptions
Ontology is the nature of social science, asking if social entities are objective entities or social
constructions (Bryman & Bell, 2011). For this study we have opted to use a constructionist
viewpoint. Because we are dealing with people and differing opinions, a constructionist
approach is most relevant (Bryman & Bell, 2011).
Epistemology on the other hand is the study of knowledge and how it is understood.
Epistemology deals with what should or should not be considered legitimate knowledge about
specific areas of study (Bryman & Bell, 2011). We have chosen an interpretivist approach
because it coincides with our reasoning behind the choice of branch of ontology in the sense
that we are talking to people and focusing on how individuals understand and interpret their
surroundings based on context (Bryman & Bell, 2011).
3.2 Research Design
This study’s aim is to answer the research question “What effects do auditing standards and
inspectors have on auditor judgment regarding the audit of FVMs?“ and thus, as discussed
above, a qualitative mindset is used. The research design is therefore based on the notion that
the best way to yield answers to the research question is to speak to people and try to dig deep
into their views, opinions and beliefs on the subject matter. This will yield the best possible
data for the analysis (Klopper, 2008).
3.2.1 Data collection technique
The empirical data for this thesis was originally intended to be collected by conducting semi-
structured, face-to-face interviews. However, due to the global Covid-19 pandemic of 2020 we
were instead forced to resort to carrying out the interviews digitally with Zoom and Microsoft
18
Teams12. Semi-structured interviews are a useful tool when you want the interview to follow a
certain scheme but at the same time give the interviewees some leeway in what their answers
are or main focus is (Bryman & Bell, 2011; Qu & Dumay, 2011). We believe that semi-
structured interviews were the most appropriate to use for this thesis because we have a specific
topic in FVMs that we wanted to pervade the conversations. Furthermore, we wanted to avoid
the rigidness of structured interviews and argue that this would not have brought answers of
any substance for the analysis. The interviews followed the structure of the interview guide
found in Appendix 1, but at times we needed to ask follow-up questions not included in the
guide and go with the flow of the interview as is the nature of the semi-structured approach.
3.2.2 Sample
For the sample we needed to have auditors and inspectors with experience of auditing FVMs,
in particular using ISA 540. We argue that this was the most relevant and efficient way to get
the empirical data needed to answer the research question. We were quite open to what the
interviewees exact role within their organizations was since we found that by having an open
mind to who, in the audit-spectrum, you interview you may yield richer data with a wider range
of perspectives and points-of-view. We performed a lesser amount of interviews than initially
intended due to limitations discussed later on. 5 interviews were performed and since this is a
qualitative study this should not necessarily have a significant negative impact (Slevitch, 2011;
Farquhar, 2012), one of the reasons being that the interviewees have all been carefully selected
based on their extensive experience in the area of FVMs.
Because this study was specific to FVMs, the knowledge required for the sample group was
also specific and we needed interviewees with a specialised knowledge of FVMs and of
auditing FVMs. The selected interviewees held high competence and experience in the field,
which allowed us to gather the necessary knowledge of FVMs from the sample. By having
well-informed and extensively experienced interviewees we prevented speculative and
uninformed answers to our questions. We focused the search on auditors from Big 4 firms13.
The reason being them having the majority of the complex FVMs cases, and thus, their auditors
would have the greatest experience of FVM auditing. To reach out to our desired sample group
we used secondary contacts by either emailing or calling and when the opportunity arose we
12 Which software was used had no notable effect on this study. 13 The Big 4 consists of Deloitte, EY, KPMG & PwC.
19
made use of the snowball effect (Farquhar, 2012). The sample is summarised in Table 3 with
the interviewees’ positions, experience, and the length and date of the interviews. Due to
anonymity concerns we omitted the specific organizations of which they are employed but
included whether they are working in an inspecting entity or an audit firm. Furthermore, the
inspector’s position and experience were also anonymised because RI is a fairly small
organization.
TABLE 3 - Sample
Interview Position Inspector or
Auditor
Experience Length of
Interview
Date of
Interview
#1 -14 Inspector -15 45 minutes 2020-04-22
#2 Executive
Director
Auditor 15+ years of Big 4
experience
35 minutes 2020-04-28
#3 Director Auditor 15+ years of Big 4
experience
55 minutes 2020-04-30
#4 Partner Valuation
Specialist
(Auditor)
25+ years of Big 4
experience
40 minutes 2020-05-11
#5 Partner Auditor 20+ years of Big 4
experience
40 minutes 2020-05-19
3.2.3 Operationalization
The interview guide consists of four different categories: introduction, the difficulties of FVMs,
auditing standards, and inspector influence. We chose these categories based on what we found
relevant to the study in the literature review and how that ties in with the two main factors of
the theoretical framework; standards and inspectors influence on auditor judgment. For
example, the FVM gap (Glover et al., 2019) led us to ask questions about inspector influence.
The intent was getting to know the interviewee and their experience of auditing, FVMs,
inspectors, and audit procedure. As this study is about auditing FVMs it was imperative to ask
questions about FVMs and how their nature of being ambiguous can create problems when
auditing them, thus the category, the difficulties of FVMs. Further on in the interviews we
wanted to delve deeper into the auditing standards because they are an integral part of this
14 Not disclosed due to anonymity. 15 Not disclosed due to anonymity.
20
study. We asked questions about ISA 540, but also how auditing standards in general affect the
audit process in different ways. Lastly in the inspector part of the interview our intentions were
to get an understanding of how inspectors influence the audit process and what the opinions,
of both auditors and inspectors, are on what the role of an overseeing organization such as RI16
is. The interview guide can be found in Appendix 1.
3.3 Data Analysis
For data analysis, a thematic analysis method to identify themes from the interview transcripts
was used. A thematic analysis was chosen due to it being one of the most commonly used
techniques in qualitative interview studies (Bryman & Bell, 2011). The procedure of the
analysis was constructed in accordance to Burnard’s (1991) method where we began by taking
notes right after the interviews were finished and then transcribing them in their entirety. The
transcription process included both authors listening back to the recorded interviews at least
two times and carefully writing them down word for word, leading to 55 pages of empirical
data. The next step was reading the transcripts thoroughly, identifying different themes and
patterns in the answers given. We used the thematic method to identify important codes that
could support different perspectives in the analysis section. These codes were based on the
operationalization, which had us divide the problem into the main themes of the difficulties of
FVMs, auditing standards, and inspector influence. We defined subheadings to those three
main themes that we believe capture the essence of the two main factors of the theoretical
framework; the influence on auditor judgment imposed by auditing standards and inspectors.
We went on to scour the interview transcripts for responses that could help spotlight those
discussion points. Some examples of the subheadings are: rigidness of standards and
differences in inspections internationally. We chose to exclude some parts of Burnard’s (1991)
process, for example we chose not to ask an outsider to identify themes to compare to our own.
Data that was deemed irrelevant to the research was omitted (Smagorinsky, 2008) to keep the
study focused on the main subjects of the complexities of FVMs, audit standards, and inspector
influence.
After organizing and categorising the data and isolating the parts deemed most vital and
insightful we started to construct the empirical findings and analysis chapter of the thesis. We
began by structuring the chapter according to key questions asked during the interviews that
16 The Swedish equivalent to PCAOB.
21
tie neatly into the themes described above. We then went on to make connections between
responses given by the interviewees and key points made by previous research presented in the
theory chapter. Lastly, we applied the theoretical framework to the empirical findings and
analysed them accordingly. In the Empirical Findings and Analysis section follows a summary
of the most interesting and important findings from this process.
3.4 Ethical Reflections
Diener and Crandall (1978, as cited in Bryman & Bell, 2011, p. 128) broke down ethical
principles in business research into four categories. However, for this study we only really need
to address one of the four17; whether there is a lack of informed consent or not. We believe that
we have taken this into consideration. It was made clear from first contact that the interviews
would be anonymous and that the interviewees had the option to opt out of the process at any
time. We also informed the respondents ahead of the interview what we were going to discuss
and they were given some example questions to use for preparation. The interviews were
recorded in audio format and consent was given by all participants.
3.5 Quality Criteria
For the study’s quality criteria, we have chosen to evaluate it with trustworthiness and
authenticity. According to Bryman and Bell (2011) and Lincoln and Guba (1985), there are
four different criteria when evaluating a study’s trustworthiness: credibility, transferability,
dependability, and confirmability. We will now explain and evaluate each criterion to the thesis
and how we can achieve trustworthiness.
Credibility can be achieved by detailing how the study was carried out with good practice
(Bryman & Bell, 2011). We have in this section described how the study was done and taken
research ethics into account thus achieving credibility. Transferability can be achieved in a
similar way, by thoroughly detailing how we made this study, assumptions, theoretical
framework, or procedure of interviewing. Transferability is achieved when a study can be
transferred to another social context or study (Bryman & Bell, 2011), and we argue that we
achieve transferability by presenting a detailed methodology section which could be adapted
in further studies. Dependability is according to Lincoln and Guba (1985) similar to an “audit-
approach” in the way that you can achieve dependability by saving for example interview
17 Due to a lack of relevance for the study on the other 3 categories.
22
transcripts and other records that are not found to its entirety in the study itself (Bryman &
Bell, 2011). Finally, to achieve confirmability in a study the authors need to show how they
acted in good faith (Bryman & Bell, 2011). We argue that by showing every step of the process
and how we did act in good faith, by showing that we have been as objective as we realistically
can be, we achieve confirmability.
Those four criteria were comprised in the larger quality criterion of trustworthiness,
followingly, the second criterion is authenticity (Lincoln & Guba, 1985; Bryman & Bell, 2011).
According to Lincoln and Guba (1985) there are five different criteria within authenticity. One
example of those is educative authenticity, which argues whether a study helps people to
understand other perspectives better (Bryman & Bell, 2011). For this study we find ontological
authenticity the most relevant to the study. We believe that by highlighting how judgments can
differ when auditing FVMs, we contribute to the understanding of social contexts which is
highly relevant to this thesis’ research question.
3.6 Limitations and Weaknesses
Because of the Covid-19 pandemic, the study suffered in several ways. Due to social distancing
regulations we could not perform the interviews face-to-face. Instead we opted for digital
interviews. Furthermore, our target sample group were seemingly more hesitant to agree to
interviews during the pandemic and the snowball-sampling method was not as effective as
planned. According to some of the people we contacted, this was due to them working remotely
from home and the workload had increased with this change. We struggled therefore to get the
desired amount of interviewees; however, in the end we managed to get an adequate,
knowledgeable sample.
All interviews of this study were held in Swedish because it is the native tongue of all the
interviewees and the researchers. This means that the translated quotes may lack certain
nuances that are hard to capture in a translation. We have done our utmost to ensure that the
translations are accurate and true to the original statements, but it is important to keep in mind
that translations may have a possible negative effect.
23
Since this is a bachelor’s thesis, there is a limited amount of time one has to plan and conduct
their study. But we believe that during this timeframe we managed to create a study that is of
interest to the field of auditing FVMs.
24
4. Empirical Findings and Analysis
In this section we begin by giving a short description of the object of study in this thesis.
Followed by an organized description of the empirical data gathered with a selection of quotes
from the interviews. We also draw parallels between patterns in the empirical data and the
literature study. Lastly, we present the application of the theoretical framework on the
empirical findings.
4.1 The Complexity of FVMs
FVMs have become increasingly more prominent in accounting (Bell & Griffin, 2012; Power
2010) and this has led to an increased burden on auditors. Level 2 and Level 3 inputs require
estimates and assumptions since there is no active market to gather prices from (Deloitte, n.d.).
The models used and the assumptions related to them play a big part when producing these
complex FVMs (Bratten et al., 2013). We interviewed auditors, a valuation expert18 and an
inspector19 from the Swedish equivalent to the American PCAOB, Revisorsinspektionen (RI).
We wanted to get an understanding of their view on complex FVMs as well as auditing
standards in general, of ISA 540 and of the inspector influence. In this first section we will
present quotes from the interviews about the complexity of FVMs and discuss their potential
implications.
4.1.1 An Increased Work Burden
We asked the interviewees if they think that complex FVMs increase the burden on auditors.
Every respondent agreed that the increasing prominence of FVMs in accounting and auditing
brings with it a new level of complexity for the people who work in the field. Consequently,
the amount and difficulty of the work has increased.
“Definitely, especially now that there is a new standard, well not new but revised ISA
540, where the demands on us auditors are extended.” (Interview #5)
18 The valuation expert is referred to as Interviewee #4 henceforth. 19 The inspector is referred to as Interviewee #1 henceforth.
25
Interviewee #1 said:
“That is the way it is and it is a part of being an auditor, partly understanding when you
should not take on a job and when you should. The answer is really that it gets more
complex and it most likely has to, it is not possible to go around it (...) the job has to be
done and an increased burden has to be accepted otherwise maybe you should not be
an auditor.” (Interview #1)
Interviewee #1 was adamant that the increased burden is something natural and has to be
accepted and Interviewee #5 mentioned that FVA is increasingly more prominent and an
important part of financial reports. This largely coincides with what previous research has
found, that the complexity of FVMs increases the work burden for auditors (Martin et al., 2006;
Bratten et al., 2013; Cannon & Bedard, 2017).
4.1.2 What the Focus is Put on When Auditing FVMs
To understand why FVMs increase the work burden we need to understand what the focus is
when auditing FVMs, and why it is difficult. We asked the interviewees which they thought
were the most important parts, and what the focus is when auditing FVMs. Interviewee #2
responded:
“I would say that we put the most time on estimations and the data for the models. Not
so much time on the models themselves as they are often standardised.” (Interview #2)
The judgments and estimation of FVMs was one of the focal points found by the interviewees.
Interviewee #3 mentioned three areas that are important when talking about estimations and
judgments; that it is important to have good methods, good assumptions, and good input data.
“(...) it is primarily in these important estimations and judgments where, if you go
wrong, it can really go wrong. That is why we have an important role in challenging
and looking, Do they have enough precision in these?” (Interview #3)
“(...) if you have bad data and do your estimates on it, then it all falls apart.” (Interview
#3)
26
Interviewee #3 claimed that the problems with auditing FVMs often emanate from the
documentation provided by the client and how it is often too thin and inadequate, especially in
smaller companies. The challenge is that in order to make an adequate audit of the judgments
and estimates made by the management, there needs to be quite robust supporting
documentation. If the documentation is poor, it does not matter what the auditing standards
says since it is difficult to perform an adequate audit when the material is thin. This viewpoint
was supported by Interviewee #2 and Interviewee #4 elaborated by claiming that if the material
submitted to the valuation specialist team is of low quality, the time it takes them to do their
work is often increased as a result of them needing to make their own models and calculations.
Interviewee #5 claimed that what could be improved upon from the client’s side is the
reasoning behind different estimations and judgments made about the future and also how the
demands on the clients, from auditors, will likely increase with the newly revised ISA 540.
Interviewee #5 mentioned that there are two aspects of assumptions: technical20 and business
assumptions. The business assumptions were recognised as the most challenging part of
auditing FVMs which Interviewee #3 also supported by mentioning how important it is that
you as an auditor challenge the business assumptions made by the client when evaluating their
assets.
“We have to make sure it is not fantasy with these forecasts (...) These forecasts assume
a large revenue and profit increase, what support do you have for this?” (Interview #3)
Overall it seems auditors most heavily emphasize the subjective aspects of FVMs with
judgments and estimates. They have to make sure that the clients have used a thorough and
reliable methodology but most importantly that the assumptions made hold water based on the
financial reality they operate within. If the assumptions and inputs are not solid the valuations
lose their reliability and credibility. This coincides with what previous research has found; that
judgments and estimates are the main culprit of the complexity when auditing FVMs
(Christensen et al., 2012; Bratten et al., 2013; Cannon & Bedard, 2017).
20 E.g. the WACC in a discounted cash flow-model.
27
“The problem is that they are judgments. There is nothing that is entirely right or wrong
so you can have one opinion and the client can have another, and it can sometimes be
hard to completely rebuff it” (Interview #5)
Ultimately, when subjectivity is involved, there is always going to exist a level of uncertainty.
How FVMs are handled will be uncovered in the upcoming section.
4.1.3 How FVMs Are Handled
We asked the interviewees if they find that audit firms and auditors in general deal with FVMs
appropriately. Interviewee #1 said:
“(...) generally for the big firms, since it is those who above all work with complex fair
value measurements, it does work well. They have specialists and so on, I would say
that the quality is good.” (Interview #1)
Interviewee #1 expressed that with the help of specialists an auditor can get sufficient assurance
of the validity of the FVMs. Similarly, when looking at RI’s latest quality controls on the Big
4 firms, no specific mention of problems regarding FVMs was presented (RI, 2017; RI, 2018;
RI, 2019a; RI, 2019b). It was repeated many times by Interviewee #1, that the use of a specialist
is a very useful tool and that without them, Interviewee #1 claimed that they would not feel
comfortable signing off on an audit21. Interviewee #2 supported this:
“Relatively well, I would say. In these companies where there are large items and large
sums that are valuated with fair value, then you often call in specialists to help.”
(Interview #2)
Previous research has found that the use of specialists is customary when auditing FVMs (e.g.
Martin et al., 2006; Cannon & Bedard, 2017) and seemingly RI does not necessarily see this as
problematic, at least from Interviewee #1’s viewpoint. The valuation specialist in Interview #4
shared:
21 Referring to their own experiences as an auditor.
28
“(...) we (valuation specialists) often come in to the audit when there is Level 2 and
above all Level 3 in IFRS 13, where there is a need for more qualified judgments. Partly
because the choice of method is not always evident but rather you need to judge what
is a suitable method in the context, and also you need to judge what is reasonable data
in these valuation methods. And I suppose it is often there we contribute the most.”
(Interview #4)
When asked about what can be improved upon in the audit of FVMs Interviewee #1 found that
there is always room for improvement and how the documentation part of the audit can always
be better. Interviewee #1 also recognised the importance of keeping a professional skepticism
toward the client. Interviewee #3 responded to this by shifting the blame, to some extent, on
the clients:
“I think we share that viewpoint22, in how important it is. Then it can vary from mission
to mission in how well it is documented. But often it emanates from that we have not
been clear enough with our demands on the clients.” (Interview #3)
The findings from these interviews suggest that perhaps the difficulty of auditing FVMs does
not lie in actually carrying out the appropriate auditing measures and techniques when faced
with fair value but rather in the aspect of communication. Documentation was brought up as a
main concern both on the auditor and client side as well as auditors not always approaching
their tasks with sufficient professional skepticism. The interviewees did recognise that auditing
FVMs is complex, but they did not paint a picture as dreary as previous research suggests
(Christensen et al., 2012; Bratten et al., 2013; Cannon & Bedard, 2017; Glover et al., 2019).
4.2 Auditing Standards
As FVA has evolved to become one of the most important parts of modern day accounting
various standards in accounting and auditing alike have changed accordingly (Bell & Griffin,
2012; Power, 2010). However, some researchers have found that the change of the standards
may have brought with it issues. Christensen et al. (2012) claim that the standards are complex
and therefore impact the auditor’s ability to perform audits to an adequate level of assurance.
Are the standards in need of change or improvement or are there other factors that are more
22 That documentation could be better.
29
vital to address? During the interviews we inquired about current auditing and accounting
standards23 to find possible explanations.
4.2.1 Audit Standard Rigidness and Box-Checking
We asked regarding the strictness of auditing standards, whether the interviewees find the
current standards too rigid or perhaps problematic in some other fashion. The general consensus
amongst every interviewee was that the standards are well adjusted to the demands of
contemporary fair value auditing. Interviewee #2 said:
“In some parts I do not find ISA very strict (...) overall, I prefer looser rules because
they allow for more interpretations of your own, based on what you find reasonable in
the current context you find yourself in. Anything else can get very square.” (Interview
#2)
Interviewee #3 agrees that the standards fulfill their purpose adequately and suggests that
issues in the audit process occur due to reasons other than the standards:
“The standards and tools and such are good, but the problem is that the customer, the
companies, that create these financial reports according to IFRS or whatever they use,
they are the ones responsible for valuing assets (...) and the documentation that lays
the foundation of what we as auditors examine and take a stand on is often too thin.”
(Interview #3)
This connects to the next point of inquiry which was checklists. The interviewees were asked
whether they find checklists useful, in what ways they might assist during an audit and if they
potentially cause issues as well. The respondents were unified in that checklists can become
problematic if auditors rely heavily upon them, compromising their professional skepticism
approach as a result. Interviewee #3 highlighted the importance of professional skepticism and
judgment:
23 Specifically, IFRS 13 and ISA 540.
30
“When you ask the critical questions and judge, that is where you usually find if
something is amiss, rather than when filling out a checklist. I believe that it is important
that there are sufficiently experienced individuals who can judge and critically question
information; is this really reasonable?” (Interview #3)
Interviewee #1 also made clear the importance of thinking critically:
“I do agree that it can lead to auditors relying too much on checklists. Checklists are
good in many respects, they do ensure that you have done the task that you are expected
to (...) but there is a risk of it becoming more focused on checking boxes than thinking
about what you actually have done. Checklists are a useful tool for getting an oversight
if you have done certain tasks but there is a risk of not reflecting enough.” (Interview
#1)
The interviewees recognised the usefulness of checklists as a tool but at the same time
acknowledged the possible problems of box-checking and not applying proper professional
skepticism. This coincides with Dowling et al. (2018) findings, that box-checking leads to
relying on the list too much and thus not assuming the professional skepticism viewpoint.
Checklists will also be discussed in 4.3 Inspector Influence and in the Discussion, on what
negative effects an increase of box-checking can lead to. The auditing standards were not seen
as rigid by the interviewees and there was no discontent with how the standards are formulated
today. Power (2010) suggested that auditing standards are playing catch-up with accounting
standards, but the interviewees thought that ISA 540 has a good connection to IFRS 13, which
contradicts Power’s (2010) view, at least when it comes to ISA 540.
4.2.2 Differences Between ISA and PCAOB
Discussions were also held regarding the differences between PCAOB and ISA and if that may
impact the way the work of an auditor is shaped. Interviewee #2 explained that while ISA 540
is not particularly strict the American counterpart standards often are. Interviewee #4
concurred, stating that:
“In some cases, the demands are significantly more ambitious than in others. For
example, if the rules are American, PCAOB for example, that the client follows, then
the scrutiny required becomes a lot more extensive.” (Interview #4)
31
It would seem that there is some merit to the idea that American regulations and standards take
on a more rule-based structure which leads to tighter demands and less room for auditor
judgement. Interviewee #3 also emphasized that ISA is a principle-based framework and not
rule-based where the focus is on auditor judgment and professional skepticism. However,
Interviewee #5 was of the opinion that while IFRS and GAAP have significant differences the
respective auditing standards do not differ that much:
“When it comes to auditing standards like ISA and PCAOB, ISA too is, according to
me, fairly close to American standards. I would say they are fairly rule-based in that
they are quite detailed when you get down to the actual guidelines that can be found
in the standards.” (Interview #5)
Glover et al. (2019) pointed out that how standards are designed and interpreted may differ
between countries and parts of the world which we also see suggestion of in the interviews. It
is however not clear cut as at least one interviewee expressed somewhat opposing views to the
rest implying that ISA and PCAOB are more similar than not.
Interviewee #2, #3 and #5 also said that firms tend to develop their own internal structures and
principles that are adopted globally which may suggest that the differences are not that great if
it is possible to overcome them when creating systems a firm is supposed to apply on a global
scale.
The firms’ internal principles were discussed further in several of the interviews. The audit
firms create their own work plans and instructions for various types of assignments that, while
rooted in ISA, seem to be more rigid in their configuration:
“I rarely go in and read any ISA standards. We chiefly follow our own methodology
(...) it is based on ISA, you take ISA and then we make our own interpretation of it
and from that templates and so on are created. (...) In general the idea is that our
internal framework should at least comply with ISA.” (Interview #2)
Interviewee #2 went on to explain that the internal system their firm applies works well but
there are some templates that auditors might find cumbersome to fill in that are not entirely
32
relevant in every situation. Some templates perhaps try to cover too much ground and
therefore lose relevance and the auditors have to pick and choose where to spend the most
effort.
Interestingly it seems that while auditors find ISA fairly well adjusted and accommodating in
terms of autonomy, the interviewees view their firms’ internal systems as less forgiving with
more templates and procedures to comply with, when performing an audit on FVMs. The same
appears to be true for internal inspections as well, which will be discussed in the next section.
4.3 Inspector Influence
Inspector influence according to Glover et al. (2019) is an often-disregarded factor when
auditing FVMs. They present the FVM gap where they argue that auditors and inspectors have
differing opinions on what constitutes sufficient and appropriate audit evidence when auditing
FVMs and how inspectors may demand more audit evidence than what is required by auditing
standards. We tried to uncover what the role of an inspector is and how they affect the auditors
and their judgment. To avoid bias in the empirical findings we obtained the view of both
auditors and an inspector.
4.3.1 The Role of Inspectors and Revisorsinspektionen
We asked the interviewees what they think that the role of Revisorsinspektionen (RI), the
Swedish equivalent to PCAOB, is in the audit process and audit quality. All respondents
recognised the importance of having an inspecting entity for the reputation upkeep. Ensuring
quality was also an important point for some interviewees. Interviewee #1 shared:
“It is important24. It is to ensure the quality of our approved authorised auditors (...) We
contribute to that, partly with our quality inspections, partly through the matters we
resolve and where we express our opinion on different things which I know is read by
the audit firms.” (Interview #1)
Interviewee #2 agreed that RI is an important cog in the auditing process for auditors to
maintain their reputation and trust. Interviewee #5 also recognised the importance of having an
inspecting entity, claiming that its role in upholding the quality of audits is integral. Interviewee
24 The role of RI.
33
#5 also extended on how important it is that auditors are trusted and how the audit needs to
have integrity:
“We fulfill an important societal function, that you can trust the financial information
that the companies publish, and if you do not have faith in the auditors then you miss
out on the point of having an audit at all.” (Interview #5)
Interviewee #1 expanded on this by claiming that it is evident that if you are aware that an
inspection may happen, you are going to put more effort in and that there is a great reputational
risk if something is uncovered. Overall the respondents were in unison that RI plays an
important part and that inspections are important for maintaining the integrity of audits.
4.3.2 Documentation and Checklists
An important point brought up in several interviews was that documentation is an ongoing
issue. The RI representative claimed that the biggest concern during inspections was that the
audit documentation was lacking. Interviewee #2 shared:
“It is the documentation they (RI) focus on. They do not care that much about if the
company has correct financial reports or not, but rather if you have taken on the audit
of these measurements in a correct way and documented it correctly. Their focus is
solely on the documentation.” (Interview #2)
We asked the auditors if they think that the demands on their documentation by RI is high,
Interviewee #5 did not think that, and Interviewee #2 expanded on how they have internal
inspections at the firm:
“(...) no, not in my contacts with them. We have our own internal quality inspections,
we do not have RI at our’s that often to inspect us because we have our own quality
inspections where we inspect our own colleagues (...) And since we have these kinds
of programs in place and RI comes and inspects that we have these kinds of programs,
leads to less frequent inspections from RI.” (Interview #2)
34
Interviewee #2 also mentioned how the internal inspection might even be tougher than the
external but still recognising how the external inspection have worse consequences than the
internal which are not public in the same way as external warnings by RI.
Based on Dowling et al. (2018) research which suggests that audit firms use box-checking as
a defense-mechanism against inspectors we asked the interviewees about checklists and how
they can affect the inspection of fair value auditing. The RI representative said that while
checklists can be useful for auditors to keep track of a jobs progress there is a risk that it is
taken too far, possibly alluding to that this had been the case in previous inspections a few years
ago. They went on to say that RI emphasizes making sure that auditors put enough effort into
maintaining a questioning mindset despite the use of checklist type tools. Interviewee #5 turned
the argument around and made the point that the box-checking problem can apply to inspectors
as well:
“I suppose there is a danger to it too with the checklist part. It is easy for RI too, to
just use checklists in their inspections and then it can happen that they are focusing on
the wrong things instead of the important questions” (Interview #5)
This coincides with Power (2009) and Dowling et al. (2018) who found that ‘box-checking’
gives both auditors and inspectors a sense of comfort.
4.3.3 The FVM Gap
The FVM gap found by Glover et al. (2019) was one of the focal points for the research and
we were curious to find out if we could find any empirical support for this in the study. We
told the interviewees about the theory of the FVM gap and they seemingly did not recognise
this as a common occurrence. Interviewee #1 reasoned that most of the employees at RI are
former auditors, and thus, do not demand more of the auditors than the standards require, this
was also supported by Interviewee #3. Furthermore, Interviewee #3 recognised how they and
RI share the view of the documentation part of the audit needing to be improved upon.
Interviewee #2 however, recognised a possible gap25 with RI’s lawyers:
25 Not necessarily restricted to FVMs.
35
“RI largely has former auditors employed so from that part I do not see any big
difference. However, they also employ lawyers who have not worked in the auditing
field and for them there might be another view on things.” (Interview #2)
Interviewee #2 reasoned how the lawyers at RI can have a very judicial interpretation of things
and thus creating somewhat of a gap between themselves and the auditors they interact with.
4.3.4 Differences in Inspections Internationally
We were intrigued by how none of the respondents recognised the FVM gap to the extent that
Glover et al. (2019) described and asked if this might be due to the dissimilarities of the
PCAOB26 and RI. This seemingly was a fruitful area and we found that there was a perceived
difference. Interviewee #2 recognised how the American, Dutch and British inspection
agencies are much tougher than the Swedish. Interviewee #5 furthered on this:
“I think that, if I’m being honest, that the Swedish RI is a few years behind compared
to other inspection entities in other countries such as Holland or England, or the
PCAOB in the US. They have much tougher demands on auditors in other countries
than RI does in Sweden. But I think that the trend is going toward, that there will be
tougher and tougher demands, but that we are not quite there yet. I think that Big 4 at
least is, I hope, ahead of RI because we are affected by our international network a lot.”
(Interview #5)
Interviewee #5 furthered the argument by claiming that putting an American auditing standard
next to ISA, you would not see any large differences, rather it is the inspections that are
different, but Interviewee #5 has also noticed a change in inspections during recent years:
“I think that the demands increase all the time. An inspection five years ago
demanded much less than an inspection demands today, which I think is positive that
the demands increase.” (Interview #5)
Interviewee #5 believed that demands and inspection toughness increasing is a good thing for
auditing. This was not supported to the same extent by the other interviewees, but there was a
26 Or inspectors from other countries, such as the United Kingdom and the Netherlands.
36
consensus in that RI’s inspections are not that tough nor frequent currently compared to other
inspecting entities.
4.4 Interplay Between the Complexity of FVMs, Auditing Standards,
Inspector Influence, and its Application on the Framework
Auditing itself is a series of judgments made on what a company presents. When auditing
FVMs the judgment part of the audit is even more demanding and essential (Christensen et al.,
2012; Bratten et al., 2013, Glover et al., 2019). Interviewee #5 mentioned how two auditors
can, with the same information, make two different judgments, and neither necessarily have to
be wrong. How can this happen? The JDM expertise literature attempts to answer this question.
Mumpower and Stewart (1996) found that complex tasks with subjective judgments can lead
to differences of opinion and conclusions by two experts. Furthermore, Einhorn (1974) found
that, when comparing two experts, they clustered variables the same way and their judgments
were reliable in the same way, but they did not weigh and combine information in similar ways.
This resonates with what Interviewee #5 said:
“There is always room for interpretation (in auditing standards). An audit is, after all, a
question of judgment and a lot up to professional judgments. With the same
preconditions, two auditors can make two different assessments. Without either being
wrong.” (Interview #5)
The reason we see why auditors can have different opinions, is due to the structure of the audit
process. Auditing is mainly about making judgments. But in the structure versus judgment
literature we can see how auditing firms tend to lean toward more structure, as a more
structured audit process may lead to a more efficient audit (Bamber et al., 1989; McDaniel,
1990). That this seems to be the case is apparent from the interviewees’ descriptions of the
firms’ internal structures being more rigid than the standards on which they are based. An
example of this is checklists. Despite the efficiency, box-checking can, according to the
interviewees, also lead to auditors not assuming a skeptical mindset and not emphasizing
professional skepticism when making judgments, which is also supported by previous research
(Dowling et al., 2018; Power, 2009). According to Francis (1994), introducing more structure
in the audit process leads to missing out on the “self-consciously hermeneutical or
interpretative practice” (p. 235) of auditing and by extension introducing more box-checking
37
impairs the audit quality. A recurring theme in the interviews was that when auditing FVMs
there is less structure and you cannot just check some boxes and be done with it. Rather there
is a great need of making judgments when auditing FVMs.
Another aspect of the JDM expertise literature is judging expertise (Einhorn, 1974; Weiss et
al., 2006). We saw signs in the interview data that experience is seen as amounting to expertise
when auditing FVMs. Interviewee #3 specifically emphasized that it is vital that “sufficiently
experienced” (Interview #3) personnel are in charge of making judgments on FVMs in
auditing. Weiss et al. (2006) however, argued that experience is not a reliable measure of
expertise. In studies27 of experts with varying amount of experience, there is no clear
association between how experienced the expert is and how accurate their judgment is.
Thereupon a conflict arises with the JDM expertise literature when Interviewee #3 mentiones
that it is important to have experienced persons making judgments. Weiss et al. (2006) argued
that experts often have considerable experience, but that expertise is not a product of
experience. Another aspect of the JDM expertise literature that we identified in the empirical
material was that especially Interviewee #3 thought that the documentation provided by the
clients was too thin. This resonates with Mumpower and Stewart (1996) who found that
missing or poor-quality information is one reason why there are differences in judgments.
We believe that Pentland’s (1993) discussion on how gut-feel is a vital part of an auditor's work
can be applied to the structure versus judgement debate. From the empirical data we have found
that structure is deemed important for creating a system of control and quality when dealing
with FVMs. Auditors can use tools such as checklists to make sure they have performed the
necessary steps of an FVM audit, providing a sense of comfort as discussed by Pentland (1993)
and Power (2009). However, we also had answers that seemingly imply that at times the
structure in place is too strict, not always relevant and to an extent limiting. Interviewee #2
explained that they prefer looser rules which fits well in with the idea that gut-feel is important
and that in the current climate auditors may sometimes not be able to exercise it fully when
their room for interpretation and judgment is limited.
27 See Goldberg (1968, as cited in Weiss et al., 2006, p. 443).
38
5. Discussion
In this section we will discuss what important finding we made in the previous section, how it
coincides with previous research and how we can contribute to the research field and the
auditing practice field.
Through analysis of the empirical data presented above we made a number of interesting
observations related to the issues of how auditing standards potential shortcomings and the
differing interpretations by auditors and inspectors affect auditor judgment in an FVM context.
Information from the interview study echoed previous theories included in the theory section
but there are also some angles which may not have been extensively explored in previous
literature. We believe the findings contribute to answering the research question this thesis
poses. Below we will discuss the findings we find most crucial and interesting and develop a
discussion concerning their significance to this thesis and the questions we attempt to answer.
5.1 Discussion of Findings
The research findings suggest that auditing FVMs is indeed complex, and thus, coincides with
previous studies (Christensen et al., 2012; Bratten et al., 2013; Cannon & Bedard, 2017;
Griffith et al., 2015). We also found that auditors put most effort into evaluating the judgments
made by management, also in line with previous research (Bratten et al., 2013; Cannon &
Bedard, 2017; Christensen et al., 2012).
Power (2010) made a point of how auditing standards concerning FVMs seem to have fallen
behind the development of their accounting standard counterparts and standard setters are
therefore forced to continuously try to make up for lost ground which may have led to issues
with the standards configuration, for example adequate levels of freedom made available to the
standards’ users. From the interview study conducted in this thesis we gather that this is perhaps
not an accurate description of the current situation regarding the standards. All interviewees
were unanimous in that the current standards have an appropriate level and fill the role they are
meant to in a serviceable way. What may be the cause of this? We believe that in the years that
have passed since Power’s (2010) study was published, auditing has largely caught up and
standards such as ISA 540 are now on par with for example IFRS 13 on the accounting side of
things. It is notable that the latest rendition of ISA 540 only came into force (IAASB, 2018) in
January 2020, so the process of adapting auditing standards to the prominence of fair value was
39
until recently a work in progress. Only time will tell if it will continue to be so even after this
newly revised version. A potentially good area for future research is one that uncovers what
effects the revised ISA 540 has on auditing practices. Interestingly enough, in the interviews
we learned that the Swedish RI may be somewhat behind some of their counterparts in other
countries which leads us to believe that even though standards and regulations may have started
to find appropriate configurations and approaches, translating that into practice may not happen
overnight.
The general consensus amongst the interviewees seems to be that current auditing standards
are well adjusted and fill their intended purpose. The use of specialists was not perceived as
problematic by either the auditors or the inspector we talked to, actually the responses lean
towards the opposite. Previous research has found that the use of a specialist is common when
auditing FVMs (Martin et al., 2006; Kumarasiri & Fisher, 2011; Cannon & Bedard, 2017), but
not all research is as positive as the interviewees about the large-scale use of specialists when
auditing FVMs (Martin et al., 2006; Griffith et al., 2015). The fact that FVMs increase the
burden of auditors is viewed as a natural and unavoidable side effect, coinciding with previous
research (Bell & Griffin, 2012; Christensen et al., 2012; Bratten et al., 2013; Cannon & Bedard,
2017; Glover et al., 2019). However, issues exist and communication seems to be one of the
more prominent, with documentation being the major culprit. This information is not
something specifically outlined in the theory section of this thesis. There is a possibility that it
was overlooked during the collection of source material, however, we believe that it is
something fairly new to the debate on auditing fair values and as such has not been highlighted
extensively in research as of yet. Connected to this is the choice of methodology this study
adopted, the semi-structured interview. A critical aspect of interview studies, especially the
semi- and unstructured kind, is that you open the study up to information that perhaps would
not have been revealed if you utilised a firmer set of questions. Through this method we learned
about the issue of documentation which otherwise might have been missed. The issue of
documentation may prove to be worth investigating further; if the documentation created by
auditors as they deal with FVMs28 could perhaps be improved. Perhaps this could be done with
the help of regulations and standards or maybe it is an issue better left to the judgment of
individual workers or through the internal oversight within audit firms and their networks. It is
also noteworthy that the latest iteration of ISA 540 further increases the demands put on
28 And that of the companies being audited as well as their documentation of their accounting activities.
40
auditors when dealing with FVMs (IAASB, 2018) and some of the interviewees suggested that
this will manifest in the demands auditors put on their clients. In order to meet the increased
demands in ISA 540 the auditors will have to, in turn, increase their demands on the
documentation provided by their clients.
Another point of interest is that Interviewee #2 said that they more or less acquired all their
knowledge of working procedures and guidance based on the firm’s internal system which,
while rooted in ISA, are the interpretations of the respective audit firms. This begs the question
of what implications that may have on how audits are carried out. Are the internal adaptations
of the ISA standards true to their essence or is something lost in translation? This could be a
topic for further study; how the auditing firms create their internal working programs and if
they stay true to the standards and regulations they are based on.
The FVM gap (Glover et al., 2019) was of interest to us but surprisingly we found no support
for it. This may be due to the differences between PCAOB and RI in the way and with what
toughness they do their inspections. One interviewee reasoned that they think that the
inspections of the Swedish RI are a few years behind PCAOB and its equivalent in the
Netherlands and the United Kingdom. The only gap that we could recognise from the empirical
material was a possible gap between auditors and the lawyers at RI. It was not investigated
further within the scope of this study, but it is a possible area for future research. We also
investigated if the different auditing standards PCAOB and ISA could lead to an FVM gap but
found no significant support for this and thus conclude that the FVM gap most likely is a result
of how inspections are structured and how tough they are, and there should be no large
difference between PCAOB and ISA.
Two theories, judgment versus structure in auditing and JDM expertise research, were used for
the theoretical framework of this study. We discovered that since the auditing of FVMs requires
judgment, there is potential for differences in interpretation. Glover et al. (2019) uncovered
differences in interpretation between inspectors and auditors29 but we found no evidence of
such occurrences. We did, however, find that auditors can make different judgments. This can
be explained with some JDM Expertise theories. For example, Mumpower and Stewart (1996)
argued that missing or poor-quality information is one reason why experts make differing
29 When auditing or inspecting audits of Fair Value Measurements.
41
judgments. This is in line with what Interviewee #330 said, that the difficulties with auditing
FVMs often arise from inadequate client documentation, and thus, there is a possibility of
increasing differences in judgments between auditors, or perhaps auditors and inspectors.
Box-checking checklists is a way to get a more structured audit process. McDaniel (1990) and
Bamber et al. (1989) argued that a structured audit process increases efficiency and that is why
audit firms often favor checklists and other measures that increase structure. However, the
interviewees highlighted the importance of implementing judgment and skepticism despite
checklists, resonating with Francis (1994). We found that the process of auditing FVMs is not
that structured despite the existence of checklists and other tools, the need for judgment when
auditing FVMs still takes precedence.
5.2 Contribution
One aspect of the study that may be of interest to practitioners is that audit firms need to make
sure that the audit profession does not drift into a monotone standardised box-checking
profession (Dowling et al., 2018; Power, 2009). Dowling et al. (2018) argued that increasing
amounts of box-checking could lead to graduates avoiding the audit profession and also
departures from the audit firms increasing. The findings support this as the interviewees
reasoned that it is of importance to not forget about the judgment and professional skepticism
part when you are working with checklists. Furthermore, in the case of auditing FVMs, it was
made evident by the interviewees that it is not viable to overly rely on box-checking when
dealing with the complexities of estimates and judgments of FVMs.
Another contribution this study has to practitioners is the findings of differences in inspections
between different countries. The Swedish RI might find it interesting to hear that some auditors
think that the inspections should be tougher. RI is most likely aware of the differences in
inspections compared to other countries, but from the empirical findings we found that the
toughness of RI, from the auditors’ point of view, seems to be fairly low.
The possible downside of having tougher inspections may be what Dowling et al. (2018) found,
that audit firms will establish routines and mechanisms, such as checklists, to minimise the risk
30 Interviewee #2, #4 & #5 also supported this but not to the same extent as Interviewee #3.
42
of getting inspected. That means that if the inspections get tougher the use of checklists might
increase and then the risk of losing the judgment and skepticism part of the audit increases.
43
6. Conclusion
In this section we conclude if we found an answer to the research question and fulfilled the aim
of the research. Furthermore, we summarise the most important findings and contributions, as
well as, our suggestions for future research.
The aim of this study is to help improve audit standards and shed light on inspector influence
in a fair value context by answering the question “What effects do auditing standards and
inspectors have on auditor judgment regarding the audit of FVMs?”. As this is quite a broad
question it was divided into two tracks: potential shortcomings of audit standards and different
interpretations by auditors and inspectors, and their effects on auditor judgment. We have found
that while audit standards seem to be on an acceptable level, there is empirical evidence of
other factors having an effect on auditor judgment regarding the audit of FVMs. Furthermore,
we believe that the research field is not yet exhausted and there is potential for further studies.
We found that documentation deficiencies are a problem when auditing FVMs while auditing
standards are not seen as rigid and they are interpreted by the firms globally, furthermore, ISA
and PCAOB are not perceived as very different. We also found that inspection toughness is
perceived as being lower in Sweden than internationally. Finally, we found no evidence of an
FVM gap (Glover et al., 2019), which we concluded most likely is due to differences in
inspections between RI and other inspecting entities abroad.
We analysed the data with the help of our theoretical framework. We found that JDM expertise
research explains why auditors can have differing opinions (e.g Mumpower & Stewart, 1996;
Weiss et al., 2006). However, we did not find any substantial support for differing opinions
between auditors and inspectors. The structure versus judgment research helps to explain the
balance between structure and judgment when auditing, both in general and when auditing
FVMs (e.g. Bamber et al., 1989; McDaniel, 1990). We found that despite structural processes
such as checklists, there still needs to be judgment applied when auditing and especially when
auditing FVMs.
This contributes to the research field by providing new insight on how research about the FVM
gap is incomplete (Glover et al., 2019), due to perceived differences in inspection toughness
between different inspection agencies. We also believe that documentation of FVMs is an area
44
in need of further research. The study also contributes to practitioners with insight on how box-
checking might challenge the professional skepticism part of auditing (Dowling et al., 2018;
Power, 2009). This study also provides insight on how inspections might need to be tougher,
something that could be of interest to RI.
This study identifies some potential areas for future research that may yield fruitful material
and interesting findings. Some possible areas for future studies we identified are: (1) if there is
a significant gap of interpretations between the lawyers of an inspecting entity and auditors,
and what effects such a gap has; (2) if audit firms’ internal adaptations of the ISA standards are
true to their essence or if something is lost in translation; (3) if the audit documentation when
dealing with FVMs could be improved upon; (4) how the newly revised ISA 540 has affected
auditing practices of FVOEs; and finally, (5) if the documentation of audit clients needs to be
improved upon.
45
7. References
Bamber, E. M., Snowball, D. & Tubbs, R. M. (1989). Audit Structure and Its Relation to Role
Conflict and Role Ambiguity: An Empirical Investigation. The Accounting Review, 64(2),
285-299.
Bratten, B., Gaynor, L. M., McDaniel, L., Montague, N. R. & Sierra, G. E. (2013). The Audit
of Fair Values and Other Estimates: The Effects of Underlying Environmental, Task, and
Auditor-Specific Factors. Auditing: A Journal of Practice & Theory, 32(1), 7-44.
Bryman, A & Bell, E. (2011). Business Research Methods. New York, NY, U.S.A.: Oxford
University Press.
Burnard, P. (1991). A method of analysing interview transcripts in qualitative research. Nurse
Education Today, 11(1), 461-466.
Cannon, N. H. & Bedard, J. C. (2017). Auditing Challenging Fair Value Measurements:
Evidence from the Field. The Accounting Review, 92(4), 81-114.
Christensen, B. E., Glover, S. M. & Wood, D. A. (2012). Extreme Estimation Uncertainty in
Fair Value Estimates: Implications for Audit Assurance. Auditing: A Journal of Practice &
Theory, 31(1), 127-146.
Cushing, B. E. & Loebbecke, J. K. (1986). Comparison of Audit Methodologies of Large
Accounting Firms: Studies in Accounting Research No 26. Savasota, FL, U.S.A.: American
Accounting Association.
Deloitte. (n.d.) IFRS 13 - Fair Value Measurement. IASPlus. Retrieved May 29, 2020, from
https://www.iasplus.com/en/standards/ifrs/ifrs13.
Dickey, J. C., King, M. & Shih, K. (2008). Subprime-related securities litigation: Where do
we go from here? Insights: The Corporate Securities and Law Advisor, 22(4), 2-10.
Dowling, C., Knechel, R. W. & Moroney, R. (2018). Public Oversight of Audit Firms: The
Slippery Slope of Enforcing Regulation. A Journal of Accounting, Finance and Business
Studies (ABACUS), 54(3), 353-380.
Einhorn, H. J. (1974). Expert judgment: Some necessary conditions and an example. Journal
of Applied Psychology, 59(5), 562-571.
Gilreath, Z. S. (2018). The Culprit of the Great Recession: A Detailed Explanation of
Mortgage-Backed Securities, their Impact on the 2008 Financial Crisis, and the Legal
Aftermath. Journal of Business & Technology Law, 13(2), 319-336.
46
Glover, S. M., Taylor, M. H. & Wu, Y. (2017). Current Practices and Challenges in Auditing
Fair Value Measurements and Complex Estimates: Implications for Auditing Standards and
the Academy. Auditing: A Journal of Practice and Theory, 36(1), 63-84.
Glover, S. M., Taylor, M. H. & Wu, Y. (2019). Mind the Gap: Why Do Experts Have
Differences of Opinion Regarding the Sufficiency of Audit Evidence Supporting Complex
Fair Value Measurements?, Contemporary Accounting Research, 36(3), 1417-1460.
Griffith, E. E., Hammersley, J. S. & Kadous, K. (2015). Audits of Complex Estimates as
Verification of Management Numbers: How Institutional Pressures Shape Practice.
Contemporary Accounting Research, 32(3), 833-863.
Hughes, J. & Tett, G. (2008, March 13). An unforgiving eye: Bankers cry foul over fair value
accounting rules. Financial Times. Retrieved June 3, 2020, from
https://www.ft.com/content/19915bfc-f137-11dc-a91a-0000779fd2ac
Farquhar Dawes, J. (2012). Case Study Research for Business. London, U.K.: SAGE
Publications Ltd.
Folpmers, M. & de Rijke, P. (2009). A mark-to-model approach to the valuation of
Residential Mortgage Backed Securities. Journal of Asset Management, 11(1), 55-61.
Francis, J. R. (1994). Auditing, hermeneutics, and subjectivity. Accounting, Organizations
and Society, 19(3), 235-269.
IFRS. (2011). IFRS 13 - Fair Value Measurement. In IFRS Standards (13, pp. 1-48). IFRS.
International Auditing and Assurance Standards Board (IAASB). (2008). Challenges in
Auditing Fair Value Accounting Estimates in the Current Market Environment. Staff
Accounting Practice Alert. New York, NY: IAASB.
International Auditing and Assurance Standards Board (IAASB). (2018, October). ISA 540 -
International Standard on Auditing 540 (Revised). Retrieved June 3, 2020, from
https://www.ifac.org/system/files/publications/files/ISA-540-Revised-and-Conforming-
Amendments_0.pdf
Klopper, H. (2008). The qualitative research proposal. Curationis, 31(4), 62-72.
Kumarasiri, J. & Fisher, R. (2011). Auditors’ Perceptions of Fair-Value Accounting:
Developing Country Evidence. International Journal of Auditing, 15(1), 66-87.
Liberto, D. (2019a, April 25). Level 2 Assets. Investopedia. Retrieved May 30, 2020, from
https://www.investopedia.com/terms/l/level2_assets.asp
47
Liberto, D. (2019b, June 25). Level 3 Assets. Investopedia. Retrieved May 31, 2020, from
https://www.investopedia.com/terms/l/level3_assets.asp
Lincoln, Y. S. & Guba, E. G. (1985). Naturalistic Inquiry. Beverly Hills, CA, U.S.A.: Sage
Publications Inc.
Lueck, S., Paletta, D. & Hitt, G. (2008, September). Bailout Plan Rejected, Markets Plunge,
Forcing New Scramble to Solve Crisis. The Wall Street Journal. Retrieved June 3, 2020,
from https://www.wsj.com/articles/SB122270285663785991
Martin, R. D., Rich, J. S. & Wilks, T. J. (2006). Auditing Fair Value Measurements: A
Synthesis of Relevant Research. Accounting Horizons, 20(3), 287-303.
McDaniel, L. S. (1990). The Effects of Time Pressure and Audit Program Structure on Audit
Performance. Journal of Accounting Research, 28(2), 267-285.
Mumpower, J. L. & Stewart, T. R. (1996). Expert Judgment and Expert Disagreement.
Thinking and Reasoning, 2(2/3), 191-211.
Payne, J. W., Bettman, J. R. & Johnson, E. L. (1993). The Adaptive Decision Maker.
Cambridge, U.K.: Cambridge University Press.
Peecher, M. E., Solomon, I. & Trotman, K. T. (2013). An accountability framework for
financial statement auditors and related research questions. Accounting, Organizations and
Society, 38(8), 596-620.
Pentland, B. T. (1993). Getting comfortable with the numbers: auditing and the micro-
production of macro-order. Accounting, Organizations and Society, 18(7/8), 605-620.
Power, M. (2009). The risk management of nothing. Accounting, Organizations and Society,
34(6-7), 849-855.
Power, M. (2010). Fair value accounting, financial economics and the transformation of
reliability. Accounting and Business Research, 40(3), 197-210.
Pozen, R. C. (2009, November). Is it Fair to Blame Fair Value Accounting for the Financial
Crisis? Harvard Business Review. Retrieved June 3, 2020, from https://hbr.org/2009/11/is-it-
fair-to-blame-fair-value-accounting-for-the-financial-crisis
Revisorsinspektionen (RI). (2017, October 31). Kvalitetskontroll av auktoriserade revisorer
samt registrerade revisionsbolag som utför lagstadgad revision i företag av allmänt intresse
(PwC) [Quality control of authorized auditors as well as registered audit firms who perform
statutory audits on companies of public interest (PwC)]. Retrieved June 3, 2020, from
48
https://www.revisorsinspektionen.se/globalassets/webbplatsen/publicerat/rapporter-fran-
kvalitetskontroller/2017/kvalitetskontroll-pwc-2017-0084.pdf
Revisorsinspektionen (RI). (2018, October 22). Kvalitetskontroll av auktoriserade revisorer
samt registrerade revisionsbolag som utför lagstadgad revision i företag av allmänt intresse
(KPMG) [Quality control of authorized auditors as well as registered audit firms who perform
statutory audits on companies of public interest (KPMG)]. Retrieved June 3, 2020, from
https://www.revisorsinspektionen.se/globalassets/webbplatsen/publicerat/rapporter-fran-
kvalitetskontroller/2018/kpmg-2018.pdf
Revisorsinspektionen (RI). (2019a, April 02). Kvalitetskontroll av auktoriserade revisorer
samt registrerade revisionsbolag som utför lagstadgad revision i företag av allmänt intresse
(Deloitte) [Quality control of authorized auditors as well as registered audit firms who
perform statutory audits on companies of public interest (Deloitte)]. Retrieved June 3, 2020,
from https://www.revisorsinspektionen.se/globalassets/webbplatsen/publicerat/rapporter-
fran-kvalitetskontroller/2019/deloitte-2019.pdf
Revisorsinspektionen (RI). (2019b, June 20). Kvalitetskontroll av auktoriserade revisorer
samt registrerade revisionsbolag som utför lagstadgad revision i företag av allmänt intresse
(EY) [Quality control of authorized auditors as well as registered audit firms who perform
statutory audits on companies of public interest (EY)]. Retrieved June 3, 2020, from
https://www.revisorsinspektionen.se/globalassets/webbplatsen/publicerat/rapporter-fran-
kvalitetskontroller/2019/kvalitetskontrollrapport-ey-2019.pdf
Revisorsinspektionen (RI). (2020, January 29). Kvalitetskontroll av auktoriserade revisorer
samt registrerade revisionsbolag som utför lagstadgad revision i företag av allmänt intresse
(BDO) [Quality control of authorized auditors as well as registered audit firms who perform
statutory audits on companies of public interest (BDO)]. Retrieved June 3, 2020, from
https://www.revisorsinspektionen.se/globalassets/webbplatsen/publicerat/rapporter-fran-
kvalitetskontroller/2020/rapport-bdo-19-928.pdf 31
Qu, S. Q. & Dumay, J. (2011). The qualitative research interview. Qualitative Research in
Accounting & Management, 8(3), 238-264.
Singh, J. P. (2015). Fair Value Accounting: A Practitioner’s Perspective. IUP Journal of
Accounting Research & Audit Practices, 14(2), 53-65.
Slevitch, L. (2011). Qualitative and Quantitative Methodologies Compared: Ontological and
Epistemological Perspectives. Journal of Quality Assurance in Hospitality & Tourism, 12(1),
73-81.
31 Used for one of the interview questions.
49
Smagorinsky, P. (2008). The Method Section as Conceptual Epicenter in Constructing Social
Science Research Reports. Written Communication, 25(3), 389-411.
Solomon, I. & Shields, M. D. (1996). Judgment and decision-making research in auditing. In
Judgment and Decision-Making Research in Accounting and Auditing, edited by R. H.
Ashton and A. H. Ashton, 137-175. New York: Cambridge University Press.
Vyas, D. (2011). The Timeliness of Accounting Write-Downs by U.S. Financial Institutions
During the Financial Crisis of 2007-2008. Journal of Accounting Research, 49(3), 823-860.
Weiss, D. J., Shanteau, J. & Harries, P. (2006). People Who Judge People. Journal of
Behavioral Decision Making, 19(5), 441-454.
50
8. Appendix
Appendix 1 - Semi-structured interview guide
The interviews were held digitally with audio only. The interviews were held in Swedish and
thus the questions below are also in Swedish.
To auditors:
Introduktion
1. Hur länge har du arbetat i din nuvarande organisation?
2. a) Vad är din nuvarande arbetsposition inom organisationen?
b) Hur länge har du arbetat i din nuvarande arbetsposition?
3. Vad tycker du är intressant med revision?
4. På vilka tillgångar eller skulder upplever du är utmanande eller svårt för revisorer att göra
revision på?
b) Tror du revisorer uppfattar detta annorlunda än vad tex Revisorsinspektionen gör?
5. Vilka svårigheter möter du när du utför revision?
6. a) Vad anser du om hur stränga regelverk och inspektioner av revisorer bör vara?
(b) Tycker du att stränga regler om hur man ska göra revision gör revisionen bättre och
mer rättvisande än mer lösa regler där revisionsbolaget har mer flexibilitet i deras
revisionsåtgärder? )
7. Checklistor i revision kan enligt vissa forskare leda till att revisorer förlitar sig alltför
mycket på listorna och inte beaktar andra perspektiv, vad anser du om det?
8. Vilka värderingsmetoder är komplicerade?
Svårigheterna med FVMs
1. Med verkligt värde poster tillkommer osäkerhet med värdering/mätning av en tillgång eller
skuld, detta kan bidra till en ökad arbetsbörda för revisorer. Vad säger du om det?
2. Vilka svårigheter och utmaningar upplever du med FVMs?
3. Hur anser du att revisorer överlag hanterar revision av FVMs?
4. Vad fokuserar ni främst på när revision av verkligt värde utförs? Modeller?
Uppskattningar?
5. Vilka problem upplever du med att utvärdera kundens värderingsmodeller?
6. Hur påverkar managements vilja revisionen av FVMs?
51
Regelverk/revisionsstandard frågor
1. Vad tycker du att ISA 540 gör bra och mindre bra?
2. Tycker du att ISA 540 har en bra koppling till relevanta redovisningsstandarder som IFRS
13?
3. a) ISA 540 har nyligen blivit uppdaterad, hur upplever du ändringarna?
b) Har eran revision förändrats av detta?
4. På vilket sätt formar revisionsstandarder en revisors arbete och är det annorlunda med ISA
540 jämfört med andra standarder?
5. Vad skulle kunna förbättras med ISA 540?
6. Hur mycket tolkningsfrihet upplever du att det finns på revisionsstandarder?
7. Kan det hända att man som revisor vill “gå utanför” standarder?
Frågor om inspektörer och Revisorsinspektionen
1. Vad tycker du Revisorsinspektionens roll är i dels
a) revisionskvaliteten överlag
b) och revisionsprocessen
2. Tycker du att inspektörer generellt kräver mer revisionsbevis än vad revisionsstandarder
kräver? Tror du att andra revisorer tycker det?
3. Enligt vissa forskare finns ett fenomen som de kallar FVM gap. De beskriver att revisorer
och inspektörer har olika åsikter om vad som är tillräckligt mycket samt lämpliga
revisionsbevis när man gör revision på komplicerade verkligt värde poster. Vad anser du om
det?
4. Har du erfarenhet av inspektörer?
a) om ja, hur var din erfarenhet?
b) om nej, hur har du fått andras erfarenheter beskrivna till dig?
Övriga frågor
1. Har du något att mer du vill tillägga?
To inspectors:
Introduktion
Hur länge har du arbetat i din nuvarande organisation?
1. a) Vad är din nuvarande arbetsposition inom organisationen?
52
b) Hur länge har du arbetat i din nuvarande arbetsposition?
2. Vad tycker du är intressant med revision?
3. På vilka tillgångar eller skulder upplever du är utmanande eller svårt för revisorer att göra
revision på?
b) Tror du revisorer uppfattar detta annorlunda än vad du och Revisorsinspektionen gör?
4. Vilka svårigheter möter du när du utför revision och vilka svårigheter möter du när du
utför kvalitetskontroll av revision?
5. Vad anser du om hur stränga regelverk och inspektioner av revisorer bör vara?
6. Checklistor i revision kan enligt vissa forskare leda till att revisorer förlitar sig alltför
mycket på listorna och inte beaktar andra perspektiv, vad anser du om det?
7. Vilka värderingsmetoder anser du är komplicerade?
Svårigheterna med FVMs
1. Med verkligt värde poster tillkommer osäkerhet med värdering/mätning av en tillgång eller
skuld, detta kan bidra till en ökad arbetsbörda för revisorer. Vad säger du om det?
2. Vilka svårigheter och utmaningar upplever du med FVMs?
3. a) Hur anser ni på Revisorsinspektionen att revisionsbolag och enskilda revisorer hanterar
FVMs?
b) Finns det rum för förbättring?
4. I eran kontrollgranskning av BDO (2020) så tar ni ett exempel där ni bedömer att
revisorns granskning bestod av en alltför hög grad av att förstå modeller och metoder som
tillämpas av företagsledningen snarare än att inta ett ifrågasättande och utmanande
förhållningssätt. Tycker ni att revisorer generellt använder sig av lämpliga metoder när det
kommer till t.ex. nedskrivningsprövningar av goodwill som i fallet BDO?
5. Hur ofta händer det att ni anmärker liknande problem i revisioner ni granskar?
6. Ser ni problematik i hur revisorer bedömer sina klienters modeller?
7. Vad kan det finnas för orsak till de problem som uppmärksammas under en inspektion
anser du? Handlar det t.ex om att revisorer försöker anpassa sig efter managements
önskningar?
Regelverk/revisionsstandard frågor
1. Vad tycker du att ISA 540 gör bra och mindre bra?
2. Tycker du att ISA 540 har en bra koppling till relevanta redovisningsstandarder som IFRS
13?
53
3. a) ISA 540 har nyligen blivit uppdaterad, hur upplever du ändringarna?
b) Har era granskningar förändrats av detta?
4. På vilket sätt formar revisionsstandarder en inspektörs arbete och är det annorlunda med
ISA 540 jämfört med andra standarder?
5. Vad skulle kunna förbättras med ISA 540?
6. Hur mycket tolkningsfrihet upplever ni att det finns på revisionsstandarder?
Frågor om inspektörer och revisorsinspektionen
1. Vad tycker du Revisorsinspektionens roll är i dels
a) revisionskvaliteten överlag
b) och revisionsprocessen
2. Tycker du att inspektörer generellt kräver mer revisionsbevis än vad revisionsstandarder
kräver? Tror du att revisorer tycker det?
3. Enligt vissa forskare finns ett fenomen som de kallar FVM gap. De beskriver att revisorer
och inspektörer har olika åsikter om vad som är tillräckligt mycket samt lämpliga
revisionsbevis när man gör revision på komplicerade verkligt värde poster. Vad anser du om
det?
4. Från de senaste kvalitetskontrollerna av Big4 från er så nämns verkligt värde tillgångar
eller skulder någon enstaka gång. T.ex. hos KPMG (2018) där ett bolag bytt
redovisningsprincip av fastigheter. Det finns även några dokumentationsbrister som vi kan
koppla till verkligt värde där både KPMG och Deloitte (2018) har bedömningar av risk i
poster som innehåller inslag av uppskattningar inte funnits dokumenterade. Hur mycket vikt
lägger ni på kontroll av verkligt värde poster där uppskattningar och bedömningar krävs?
5. Upplever ni att revisorer hanterar revisionen av verkligt värde poster på ett godtagbart sätt?
6. Hur förändrar användandet av specialister era granskningar?
Övriga frågor
1. Har du något att mer du vill tillägga?
Copyright © 2022 FDOKUMEN
