Auditing Fair Value Measurements: A Synthesis of Relevant Research

To contribute to the PCAOB project on auditing fair value measurements (FVMs), we synthesize relevant academic literature to offer insights, conclusions, and future research directions for auditors, standard‐setters, and academics focusing on auditing FVMs. We structure our synthesis along two dimensions: (1) an emphasis on the auditor's need to understand how FVMs are prepared, and (2) the audit steps and procedures necessary to verify and attest to FVMs, including an awareness of the potential biases inherent in auditing FVMs. Drawing primarily from the judgment and decision‐making literature, we highlight a number of potential biases and limitations in the preparation and audit of FVMs. Additionally, we note that the specialized valuation knowledge necessary to effectively audit FVMs will be difficult for auditors to gain and maintain.