The Role of Valuation Specialists in Audits of Fair Values and Potential for Change under Amended Public Company Accounting Oversight Board Standards

The PCAOB recently implemented amended standards on the use of valuation specialists. We report interviews with 42 auditors and valuation specialists in which we describe the role of valuation specialists and problems during fair value audits under the original guidance. We evaluate whether the amended guidance will change practice and mitigate these problems. We find that specialists are more involved in fieldwork relative to planning and completion. Despite changes to communication and review requirements, specialists' limited role in making conclusions relative to auditors will continue. Our analysis suggests the changes in standards are unlikely to meaningfully change practice. We expect little change because the amended standards will not increase specialists' responsibility for outcomes or provide them additional guidance, they will not require auditors to acquire valuation knowledge, and they cannot reduce the inherent uncertainty in fair value settings. These issues underlie many of the problems in this area.