This Guidance Statement has been formulated by the Auditing and Assurance Standards Board (AUASB) to provide background information about financial instruments (Section 1) and guidance to auditors on audit considerations relating to financial instruments …

This Guidance Statement is issued on 8 March 2012 by the AUASB and replaces AGS 1030 Auditing Derivative Financial Instruments . …

The susceptibility to management bias, whether intentional or unintentional, increases with the subjectivity of the valuation and the degree of measurement uncertainty. For example, management may tend to ignore observable marketplace assumptions or data …

In testing how management values the financial instrument and in responding to the assessed risks of material misstatement in accordance with ASA 540, [29] the auditor undertakes one or more of the following procedures, taking account of the nature of the …

As described in Section I, to estimate the fair value of financial instruments management may: Utilise information from third-party pricing sources; Gather data to develop their own estimate using various techniques including models; and Engage an expert …

Management may make use of a third-party pricing source, such as a pricing service or broker, in valuing the entity’s financial instruments. Understanding how management uses the information and how the pricing service operates assists the auditor in …

The following matters may be relevant where management uses a third-party pricing source: The type of third-party pricing source – Some third-party pricing sources make more information available about their process. For example, a pricing service often …

Possible approaches to gathering evidence regarding information from third-party pricing sources may include the following: For level 1 inputs, comparing the information from third-party pricing sources with observable market prices. Reviewing disclosures …