Question

Which of the following procedures would be most important in the audit of an investment valued at fair value?

A. Compare the balance in the investment account to the prior year.
B. Read the footnote disclosure related to the investment.
C. Inquire of management's regarding the accuracy and reliability of the underlying data.
D. Develop an independent estimate of the fair value measurement.

Answer 1

The most important procedure in the audit of an investment valued at fair value is to develop an independent estimate of the fair value measurement. So, the correct answer is option D.

Step-by-step explanation:

The most important procedure in the audit of an investment valued at fair value would be to develop an independent estimate of the fair value measurement. This involves evaluating the fair value of the investment using reliable and objective methods. This procedure provides an external perspective on the value of the investment, ensuring accuracy and reliability.

The other options mentioned, such as comparing the balance in the investment account to the prior year, reading the footnote disclosure, and inquiring about the accuracy of the data, are also important steps in the audit process. However, developing an independent estimate of fair value is specifically focused on ensuring the accuracy of the fair value measurement.

So, the correct answer is option D.