This paper examines how two sources of auditor expertise – industry and prior experience with goodwill write-offs – are associated with the likelihood of a goodwill write-off, and conditional on the write off, the amount of goodwill that is written off. Fair values, including goodwill impairment, are on the rise and present unique challenges to the auditor. Currently there is growing interest in understanding auditor characteristics in affecting the reliability and quality of fair value measures (Bratten et al. 2013; Bratten et al. 2015). The PCAOB has noted in its inspection reports of audit firms a significant number of deficiencies in the audit of fair values and impairment of goodwill. A quick analysis of the PCAOB inspection reports of the Big- 4 audit firms issued during 2004 to 2015 reveals that a non-trivial percentage of all the deficiencies noted pertain to testing of goodwill impairment.1 An effective audit of goodwill impairment requires a critical judgment of the reasonableness of the significant assumptions used to determine the fair value of reporting units and other several matters. Recent studies underline how the informativeness of fair value measurements depends on their reliability, which is directly linked to their verifiability and auditability (Benston 2006, 2008; Ronen 2008; Ramanna and Watts 2012; Bratten et al. 2013; Christensen et al. 2013). Although auditing fair value measures is a complex task auditors nevertheless have to provide adequate evidence and assurance of managements’ assumptions (ISA 540; AU Section 328). Therefore it is important to understand how certain auditor characteristics impact the quality of auditing and financial reporting in the context of fair values. […]
Key-Words: Revisione contabile e di bilancio
