Browsing by Author "Tesfaye Getahun Abate"

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    Does Fair Value Measurements Present Challenges to External Audits of Private Commercial Banks of Ethiopia?
    (A.A.U, 2023-06-07) Tesfaye Getahun Abate; Tekalign Nega (PhD)
    Globally, countries and companies are adopting IFRSs in an increasing rate with the hope of improving quality and credibility besides achieving a uniform set of standards for financial reporting. In this line, Ethiopia adopted IFRSs officially in December, 2014 through enactment of Proclamation No. 847/2014. The migration to IFRSs, among others, introduces the extensive use of fair value reporting under IFRSs. Thus, it‘s proper to ask the implementation of IFRSs in relation to Fair Value Measurements (FVMs). This research approaches the implementation of IFRSs in Ethiopia in the banking sector from the perspectives of external auditors. Given that there is little or no prior knowledge of the topic in the sector the research employed exploratory descriptive design. This research provides an engagement level analysis focus on the external audits of private commercial banks of Ethiopia with the emphasis of FVMs challenges, using concurrent transformative strategy on auditing phases from environmental and task characteristics of challenging FVMs to audit outcomes. Based on seven out of thirty (commonly used) experienced external auditors of descriptive analysis; the challenges of auditing FVMs are significant and/or complex assumptions, high degree of subjectivity, estimation uncertainty, lack of efficient market and valuation process. Estimation Uncertainty, Level 3, Materiality, Profit- After-Tax, and Client-Specialist are positively associated with risk assessments which are, in turn, predictive of client problems identified during the engagement. Specifically, unobserved inputs have a significant effect on banks‘ model and assumptions. The auditor-client discussions are also related to the risk assessments, but not to the breadth of problems identified and reasonable ranges of value estimation. Unfortunately, the proposed audit adjustment is infrequent; in sum, the key challenging FVMs is the evidence related to the level of fair value hierarchy and/or factors made difficult and/or complex for auditing specific fair value measurement.