“Impact of the Fair Value Measurements Risks on the Audit Quality” “an applied study” | ||
| مجلة الدراسات المالية والتجارية | ||
| Volume 35, Issue 1, April 2025, Pages 609-653 PDF (571.54 K) | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/mosj.2025.365073.1275 | ||
| Author | ||
| Asmaa Hussein* | ||
| PhD Researcher, Faculty of commerce- Cairo University | ||
| Abstract | ||
| Abstract Purpose: This research aims to examine the effect of fair value measurements risks concerning financial instruments and goodwill on the audit quality. Design/methodology: the researcher run applied study by utilizing a sample of 30 firms subjected to business combinations, thus goodwill was recorded in their financial statement from 2018 to 2022. Findings: the statistical findings reveal the significant effect of fair value measurements risks related to financial instruments and goodwill on audit quality. Furthermore, the proposed models reveal that fair value helps to overvalue assets, particularly financial instruments. Furthermore, most firms in the sample did not comply with the required goodwill impairment test. Originality/value: Fair value accounting constitutes challenges and risks in the audit process that significantly affect the audit quality. Fair value measurement is classified into three levels. Level 3 mostly constitutes a challenge due to reliance on unobservable inputs, which can lead to personal judgments, hence opening the manipulation of the financial instruments. Goodwill also constitutes challenges because the goodwill impairment test is costly, complicated, and time-consuming. Hence, management exploits these issues to enhance its image in the market by affecting its financial position. Therefore, this research introduces models to determine the fair value measurement risks associated with financial instruments and goodwill, assisting auditors in evaluating financial instruments and the outcomes of goodwill impairment tests. Additionally, these models can support standard-setters and financial statement preparers in determining the value of financial instruments and quantifying goodwill impairment losses, thereby enhancing audit quality. | ||
| Keywords | ||
| Fair Value Measurements Risks; Financial Instruments; Goodwill; Audit Quality | ||
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