The findings indicate that auditors’ lack of valuation knowledge and auditor specialists’ lack of asset-specific expertise, lead to deficiencies in their understanding of how assumptions used in FVMs are interrelated and result in auditors focusing on the minutia of the individual assumptions at the expense of a “big picture” view. The findings further suggest that company specialists are not immune to management pressure and I document several tactics management employs to inflate their specialist assisted FVMs. Management pressure is highest for non-financial level 3 FVMs. These results corroborate and explain recent findings in financial archival literature on the reliability of FVMs and enhances our understanding of the audit quality deficiencies documented by the PCAOB and other regulators.

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