The significance of the “audit” function in the corporate regulatory framework has been increasing in the last few years along with the adoption of Fair Value Accounting (FVA hereinafter) across the world. In fact, since its inception, FVA has become one of the most controversial topics in...

Firms measure fair values using Level 2 or 3 inputs when items do not trade in liquid markets, limiting market discipline over the measurements. We provide evidence that firms holding higher proportions of financial instruments measured at Level 2 and 3 fair values report more conditionally...