Current practices and challenges in auditing fair value measurements and complex estimates: Implications for auditing standards and the academy

Auditing fair value measurements and other complex estimates (hereafter, FVMs) has received significant attention from regulators, practitioners, and researchers. Using a survey, we gather data from audit partners with FVM expertise to gain further insights in areas that have not been fully explored in the previous literature. Specifically, we extend the literature by providing a deeper understanding of the following areas: auditors’ use of different substantive approaches to test higher-risk FVMs, auditors’ use of pricing services and valuation specialists, and how challenges differ when auditing financial versus nonfinancial FVMs. In doing so, our findings and analyses extend prior research and coalesce pieces of several prior studies on auditing FVMs to provide a more complete picture of current auditing practices and challenges encountered by auditors. Our study provides insights useful in reconciling seemingly inconsistent findings in previous studies and provides important implications for future research, regulation, and standard-setting.