A Research On Internal Control For Fair Value Accounting

From the beginning of1980’s, the fair value accounting has become a global problem that the domestic and practical communities study and concern. From the perspective of the accounting research methodology and accounting measurement, or from the perspective of equity theory and the contract theory, fair value accounting is an irreversible trend for the development of accounting in the21st century.Judging from the current situation in our country, there is no standard for fair value measurement, but also short of detailed guidelines for fair value measurement method in the Enterprise Accounting Standard (2006), the appropriate measures of fair value in these standards and guidelines is also inconsistent. At the same time, as a result of some reasons, Enterprise Internal Control-Fair Value is still in the research and drafting stage. The correct implementation of fair value accounting and auditing is extremely unfavorable for the existence of the systemic defects.Based on the fair value accounting information system, the security system of fair value accounting is divided into the environmental protection in the input stage, quality assurance in the information generation phase and evaluation security in the output stage. Fair value accounting security system is an interactive system, the various components of the mutual influence and promotes each other, and internal control is the core of the entire security system.Internal control environment is prerequisite for the implementation of fair value accounting. This paper analysis the relevance of fair value accounting and corporate governance through the theory of property rights, contracts, the usefulness of decision and risk management. The basic function of the audit committee in full fair value accounting era is to ensure the measurement and disclosure free from material error and provide the relative evidence. Fair value internal auditing is a kind of risk-based auditing. This article analyzes the transfer process of the fair value accounting information and the division of certain responsibility. The incomplete of fair value accounting contract causes the integrity requirements in fair value accounting.The fair value accounting risk is stipulation when an accountant implements accounting standard and the relevant system. It can be divided into two major categories: the environmental risk and the internal risk. The nature of accounting subjectivity determines the existence of professional judgment. The article concluded that the risk of fair value accounting can be extended to the fair value auditing risk and the financial analysis risk which based on fair value accounting, as the same the fair value accounting professional judgment should be extended to the auditors’professional judgment and financial analysts’judgment.Fair value accounting control activities is based on the results of fair value accounting risk assessment, combined with ways and means which adopted during using risk-coping strategies and it ensures that fair value accounting internal control objectives are achieved. This paper discusses the internal control points of the valuation techniques such as the market approach, cost approach and the income approach. Under the information technology environment, the fair value accounting internal control system including the development and operation control system, security control system and accountability mechanisms.This article argues some aspects which influence the development of standard and guidelines for fair value accounting, cites the specific criteria in the Enterprise Accounting Standards(2006) and the specific standards which guide the fair value measurement in the Implemenary Guidelines for Enterprise Internal Control(2010) and found that there exists difference or conflict between the internal control norms and fair value accounting to some degree.It suggests the key to coordinate these differences is to establish and improve the Enterprise Internal Control-Fair Value.Principal innovations in this paper are:First, it attempts combine the fair value accounting and internal control studies for the first time; Second, it builds a security system of the fair value accounting, proposed fair value accounting of internal control is the core of security system; Third, it defines fair value accounting risks and its control objectives, analyses the risk factors and risk control points in using of fair value valuation techniques.Fair value accounting and internal controls are extremely challenging point and hot issues. Because of the author ability and time limitations, combined with the two studies is an arduous task. This is the major shortcomings:First, there is no empirical research; second, the arrangements of the "internal environment" and "control activities" are not comprehensive and focused only on certain aspects; third, the discussion about "accounting credit contract" and "information technology environment" and the combination of fair value accounting is not enough. These areas will serve as my future research endeavors.