Auditability of Accounting Estimates and the IASB's Conceptual Framework Exposure Draft (2015)

37 Pages Posted: 18 Jan 2016

See all articles by Wally Smieliauskas

Wally Smieliauskas

University of Toronto - Rotman School of Management

Date Written: January 14, 2016

Abstract

An important aspect of the audit environment is the financial reporting that needs to be verified. In May 2015, the International Accounting Standards Board [IASB] issued an exposure draft [ED] for a new conceptual framework [CF] of financial reporting under International Financial Reporting Standards. We analyse this ED from audit, ethical, and logical perspectives, including by recourse to debate at the first IASB Research Forum held at Oxford University in October 2014. We find that the ED is moving to a rules-based perspective that does not address the problem of financial reporting which deviates from the stated objectives of the CF. This arises from failures to create a CF that is the overarching authority for accounting standards, to coherently integrate the CF with auditing standards, and to put bounds on estimation uncertainty associated with the valuations allowed by the ED. This last failing may be the most critical in that it can prevent the system from being a principles-based social science. In totality, the failings create problems of truthfulness, auditability, and ethics of financial reporting, as documented here.

Keywords: IASB conceptual framework, auditability, principles-based standards

JEL Classification: M40, M49

Suggested Citation

Smieliauskas, Wally, Auditability of Accounting Estimates and the IASB's Conceptual Framework Exposure Draft (2015) (January 14, 2016). Available at SSRN: https://ssrn.com/abstract=2715741 or http://dx.doi.org/10.2139/ssrn.2715741

Wally Smieliauskas (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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