Auditors' Perceptions of Fair-Value Accounting: Developing Country Evidence

The increasing application of fair value accounting (FVA) in financial reporting has given rise to a range of challenges for external auditors and auditing standard‐setters, particularly for those in developing nations. Given the dearth of prior research, this exploratory study sought to identify and examine the issues and challenges confronting auditors in a developing country context. Based on a survey of 156 practising auditors in Sri Lanka, the study found that Sri Lankan auditors were generally supportive of the decision usefulness of FVA, although they perceived specific auditing issues with its implementation in developing countries. These issues included: lack of technical knowledge, the prevalence of inactive markets in developing countries, difficulties associated with the variation in techniques used to ascertain fair values across different industries, general complexities in ascertaining fair values, and the incorporation of future events and conditions into valuations. The provision of adequate training and technical guidance were viewed as the primary means of mitigating these concerns.