193 paragraphs found
Some pricing services may provide reports for users of its data to explain their controls over pricing data, that is, a report prepared in accordance with ASAE 3402 Assurance Reports on Controls at a Service Organisation . Management may request, and the …
Obtaining prices from multiple third-party pricing sources may also provide useful information about measurement uncertainty. A wide range of prices may indicate higher measurement uncertainty and may suggest that the financial instrument is sensitive to …
In some situations, the auditor may be unable to gain an understanding of the process used to generate the price, including any controls over the process of how reliably the price is determined, or may not have access to the model, including the …
Paragraph 13(b) of ASA 540 requires the auditor, if testing management’s process of making the accounting estimate, to evaluate whether the method of measurement used is appropriate in the circumstances and the assumptions used by management are …
Whether management has used a third-party pricing source, or is undertaking its own valuation, models are often used to value financial instruments, particularly when using inputs at levels 2 and 3 of the fair value hierarchy. In determining the nature, …
Testing a model can be accomplished by two main approaches: The auditor can test management’s model, by considering the appropriateness of the model used by management, the reasonableness of the assumptions and data used, and the mathematical accuracy; or …
Where valuation of financial instruments is based on unobservable inputs (that is, level 3 inputs), matters that the auditor may consider include, for example, how management supports the following: The identification and characteristics of marketplace …
In addition, the auditor’s industry knowledge, knowledge of market trends, understanding of other entities’ valuations (having regard to confidentiality) and other relevant price indicators informs the auditor’s testing of the valuations and the …
Where there is a lack of observable external evidence, it is particularly important that those charged with governance have been appropriately engaged to understand the subjectivity of management’s valuations and the evidence that has been obtained to …
When markets become inactive or dislocated, or inputs are unobservable, management’s valuations may be more judgemental and less verifiable and, as result, may be less reliable. In such circumstances, the auditor may test the model by a combination of …