Determinants of Auditor Specialist Engagement in Fair Value Measurement Audits: Evidence from the Canadian Context

DOI: https://doie.org/10.10399/ABPI.2026919870

Authors:

Syrine Rahmouni, Emna Boumediene

Keywords:

Fair Value Measurements (FVM); Audit; Valuation Specialist; Auditor Decision Making; Risk of Material Misstatement (RMM); Estimation Uncertainty.

Abstract:

This study investigates the factors influencing an auditor's decision to engage a valuation specialist when auditing Fair Value Measurements (FVMs). We use a survey methodology and collect data from 80 Certified Public Accounting (CPA) auditors with experience and expertise in auditing FVMs. we model the decision to consult a specialist as a binary outcome using logistic regression testing the impact of the use of valuation specialist by the client, Estimation Uncertainty, Control Risk, the overall Risk of Material Misstatement (RMM), and FVM input complexity (Level 3). Our findings indicate that the likelihood of engaging a specialist by the auditor is significantly and positively predicted by the client’s use of a specialist, high estimation uncertainty, and increased control risk. These results corroborate with existing literature (Griffith, 2020; Cannon and Bedard, 2017) suggesting that auditors seek expert assistance to mitigate technical complexity and detect potential management bias.

However, the study reveals a critical divergence from professional standards (e.g., ISA 620). In fact, the overall Risk of Material Misstatement (RMM) shows a significant negative association with auditor engagement of valuation spoecialists. This suggests that in high-RMM environments, auditors may face to resource constraints or opt for less costly internal models over independent expert evaluations. additionally, the complexity of Level 3 inputs was not a significant predictor. These results highlight a concerning gap between audit standards and practice, where cost considerations and over-reliance on management’s specialists may compromise audit quality in the most challenging valuation environments.

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