PCAOB to carefully scrutinise securities valuations in accounts

Auction rate securities and collateralised debt offerings, which have proved
difficult to value, are to be examined by the US audit watchdog.

Banks in the US and other companies have experienced problems in valuing the
CDOs and securities, linked to the subprime mortgage crises and widespread
writedowns which led to massive losses.

The Public Company Accounting Oversight Board’s director of inspections
George Diacont said the valuations would be closely examined by the board during
its examination of the accounts by the firms for 2007, Reuters reported.

‘We identify a high risk portion of the audits and inspect that slice of it.
The valuation of certain investment vehicles such as collateralised debt
offerings, auction rate securities… are high risk from an inspection
perspective Off-balance sheet transactions also fall into that category,’
Diacont said.

The complex securities which have become difficult to value constitute
structured finance products made up of residential mortgage-backed securities as
well as structured investment vehicles.

Further reading:

Use fair value but disclose more – Fitch

‘Complexity’ to blame for credit crunch

UBS first bank sued over sub-prime loss

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