Auditing Fair Values of Non-Issuers (Portfolio 5404)


Mark Kohlbeck

Professor, School of Accounting

Florida Atlantic University


Mark Zyla

Managing Director

Zyla Valuation Advisors, LLC

Paul Pierson

Senior Director, Peer Review & Professional Standards

Illinois CPA Society

At a glance

I. Scope, Focus, and Purpose of Portfolio
II. Fair Value Accounting
III. Fair Value Estimation
IV. Fundamentals of Auditing Fair Values
V. Planning
VI. Interim Procedures
VII. Year-End Procedures
VIII. Sources of Evidence
IX. Using a Specialist in Auditing Fair Value
X. Auditing Fair Values Associated With Inactive or Disorderly Markets
XI. Auditing Sensitive Items Applicable to All Industries
XII. Industry Specific Issues
XII. Industry Specific Issues


Bloomberg Tax Portfolio 5404, Auditing Fair Values of Non-Issuers, explains and analyzes the rules and best practices for auditing fair values under U.S. and international auditing standards. Principal U.S. auditing procedures for auditors of non-issuers are prescribed by the American Institute of Certified Public Accountants (AICPA). Internationally, procedures for auditing fair values are set forth in International Standard on Auditing No. 540 (Revised and Redrafted), Auditing Accounting Estimates Including Fair Value Accounting Estimates and Related Disclosures.

Detailed substantive analysis of fair value accounting deliberately lies beyond the scope of this Portfolio. Readers seeking analysis of the substantive U.S. rules are urged to consult Bloomberg Tax Portfolio 5127, Fair Value Measurements: Valuation Principles and Auditing Techniques. However, this Portfolio summarizes fair value accounting to the extent necessary to illuminate users' understanding of auditing fair values.

The Portfolio describes the major auditing procedures within the framework of three significant steps in the timeline of a typical audit—planning, interim procedures, and year-end procedures. It further explores other essential aspects of auditing fair values that transcend the audit timeline. These subjects include sources of audit evidence, using an expert in auditing fair values, auditing fair values in inactive markets, and issues in auditing fair values that tend to occur in particular industries. The Portfolio also explores auditing sensitive items that generally are applicable to all industries, and it provides numerous sample audit workpapers to augment this discussion.

This Portfolio may be cited as Bloomberg Tax Portfolio 5404, Auditing Fair Values of Non-Issuers.

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