One of the pitfalls in fair value measurements is a lack of professional skepticism when reviewing management’s prospective financial information (PFI), Mark O. Smith (AICPA) writes in a blog post. He points out that factors and common procedures to consider when preparing an assessment of a company’s PFI may include, but are not limited to:

• Comparison of prior forecasts to actual results;

• Comparison of PFI to industry expectations;

• Check PFI against other internally prepared financial information for consistency;

• Comparison of entity PFI to historical trends;

• Understand who prepares the PFI and how often is it prepared; and

• Perform mathematical and logic checks.

Smith is a technical author of the Mandatory Performance Framework for the new credential for fair value for financial reporting, which includes a section on “professional skepticism.”