Factors affecting the audit of revalued non-current assets: Initial public offerings and source reliability

This study examines the impact of a proposal to issue shares to the public and the competence of the independent valuer on auditor judgments concerning asset revaluations. A 2 times 2 between-subjects design was used. Four classes of assets were revalued by a hypothetical port company and subjects were asked to assess the planned audit hours and the likelihood that they would accept the valuations as reasonable. Results indicated that auditors would plan to spend longer on the audit of revalued assets when the client proposed to make a share issue and also when the competence of the valuer was lower. They were also less likely to accept the valuations as reasonable in these cases. However, the results suggested that concern with some aspects of the valuation can override sensitivity to the competence of the valuer.