Question
16-30 : Spencer, CPA, has been engaged to audit the fair value measurements of Christensen & Son, a high-tech company in the Midwest. During the
16-30: Spencer, CPA, has been engaged to audit the fair value measurements of Christensen & Son, a high-tech company in the Midwest. During the audit, Spencer must obtain evidence that management of Christensen & Son has appropriately valued the following two accounts:
| 1. | Available-for-Sale Stock Portfolio, containing investments in Fortune 100 company stocks. |
| 2. | Stock compensation expense related to stock options granted to Christensen's employees as valued by the Black-Scholes option-pricing model. Christensen's stock is largely held by the owners and neither the company's stock nor the related stock options are actively traded. |
Required:
For each account, complete the following:
| a. | Identify the fair value inputs to the value of each account. |
| b. | Identify the valuation levels for each of the identified inputs as well as the account as a whole (i.e., Level 1, Level 2, or Level 3). |
| c. | Create a summary audit plan, by account, for how Spencer can obtain assurance regarding the fair value of each of the inputs. |
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