We agree with the paper’s observation that accounting estimates and fair value measurements involve uncertainty and management judgment. We also agree that the use of fair value in measuring financial statement items has increased recently, and continues to increase as economic activity and the underlying transactions, assets and liabilities represented in financial statements become more complex. While we agree that accepted practice should include a degree of consistency in how estimates and measurements are prepared and audited, detailed rules cannot replace the essential role of judgment. We also believe that enhancing audit standards may be a less effective remedy for the audit deficiencies referred to in the paper than enhancing the client acceptance, technical competence, audit team supervision and engagement quality review processes of audit firms.
In the discussion in the paper about the use of independent third party experts, it is suggested that the auditors treat the output of the experts as if it were prepared by the company. We agree that the work of an independent expert needs to be audited, but to ignore the independence of the experts would negate the whole purpose of using them, which is to get additional audit benefit from their expertise and independence beyond what the preparer/client would be able to provide themselves.