Use of High Quantification Evidence in Fair Value Audits: Do Auditors Stay in their Comfort Zone?

• DOI: 10.2308/accr-51662
• Publication Date: 2017-01-06T23:04:15Z
• Authors: Jennifer R. Joe; Scott D. Vandervelde; Yi-Jing Wu
• Keywords: Opportunism; Value (mathematics)

ABSTRACT Research documents significant management bias and opportunism around the discretionary inputs of audited complex estimates, including fair value measurements (FVMs), which raises questions about auditors' ability to test these estimates. We examine how degree quantification in client evidence control environment risk influence planned substantive testing management's FVMs. find that auditors allocate a lower proportion effort subjective estimate when level are both high. Further, this tendency persists even after receive regulatory practice alert reminding them focus more audit on (FV) susceptible bias, despite increasing their overall effort. Qualitative analyses procedures selected indicate inapt attention is potential root cause difficulty encounter Our results imply situations where quantified non-quantified data important audit, there for manipulate they provide distract from estimates opportunism. Data Availability: Contact authors availability.