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During this period of global markets, multinational corporations are demanding financial accounting standards with enhanced uniformity. In an effort to achieve this objective, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working together on the Convergence Project, aiming to develop accounting standards that closely correlate with international financial reporting standards. In September 2006 and February 2007, the FASB issued two key fair value accounting (FVA) standards which focused on providing guidelines for fair value measurement (through a classification hierarchy), expanding disclosure requirements, and also allowing business entities to increase FVA's application. However, the recent financial crisis has placed increased scrutiny on estimates derived under FVA. Consequently, a spotlight has been placed on the auditing profession, as the effectiveness of an auditor's ability to test estimates derived under FVA has been questioned due to numerous firms approaching collapse in the midst of the credit crisis. Thus, the purpose of this paper is to present the challenges auditors face when auditing FV estimates, and to discuss the profession's capability of adapting to FVA in the future.



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