Management applies accounting standards in the preparation of financial reports and auditors assess the fair application of those accounting standards. During 2008 and 2009, several changes were made to the IFRSs, which affected the use of fair value for certain assets and liabilities.8 Required Discuss the implications for auditors of these accounting standard changes and the associated questioning of the use of fair values in financial accounting. In particular, you should address the following issues in your answer:

• How do auditors audit fair values?

• Would it be easier for auditors if financial reports contained more or less fair value accounting?

• Are there different implications for auditors when fair values are rising versus when they are falling?