Idea to Investors and other users of financial statements, and apparently It gives more efficient Information. The problem Lies In the Implementation of fair value accounting when no active markets are existed. As a result, other bases than active markets’ actual prices are used. Even though these ways involve some merits, they are subject to uncertainty and manipulation. Therefore, generating such financial statements increases the likelihood of misleading the users. Users of financial statements relay on the auditor’s report, which gives the financial statements trustiness, therefore, effectiveness.

Thus, auditors are more responsible than any other else of any misleading. The underlying dilemma in fair value accounting is an absence of reliability in case of active markets’ lack. Fair value accounting lacks reliability because it relies on estimations more than documents, in general. Even if it is derived from markets, markets are subject to volatility. In case of inflation or recession, that makes it even worse. Furthermore, reporting unrealized gains or losses misleads users because of uncertainty about realizing them or not In the future. And no one can predict that.

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Also, naturally the tendency for manipulation and fraud increases in environments supporting estimation, and this is the environment available when no reasonable basis of estimation is available. Moreover, the new policy has a severe impact on capital-intensive companies. The benefits or harms in this kind of companies will expand the gap between them and other entitles relying on labor. In short, fair value accounting is the biggest problem facing the auditing profession because of two mall reasons which they are lack of the reliability and Its harms to the economy In the long term.

As a solution for this problem, narrowing the dependence on fair value as much as possible, making two versions of the financial statements, and including an independent third party for reevaluation procedure are necessary to reduce the risks confronting the auditing profession. First, I think policy makers should demand to do not reevaluate fixed assets and long-term liableness In financial statements unless a escalating change remains for a long period of time, more than one fiscal year. Because of the significant impact of current assets and liabilities of the entity results, hey deserve to be reported and disclosed as a fair value.

Secondly, the obligation to generate two sets of financial statements, one based on fair value and the other one based on historical cost, will give the users clearer sight to the company and its sources of gains and losses. The transparency In such conduct gives more efficiency In making decisions. Finally, Including third party for reevaluation procedure reduces ten ululating rills Heretofore, composing an evaluation report, as same as ululating report, and attaching it to the financial statements reduces the negative reaction room users to auditors.

This conduct gives more independence to the evaluation procedure and involves the third party in the risk, so it reduces risks facing auditing. Fair value is needed; however, fair value disclosure in public should be carefully implemented. Except for entities liquidation cases, I believe in documented historical cost reliability that prevents most of the intentions of manipulation or fraud. In my opinion, fair value accounting opens wide doors for such purposes if policy makers and academics do not legalize and maintain standards to govern the case before crying over spilled milk.