The number of audit deficiencies tied to fair value measurements (FVM) declined for the second year in a row, but they’re still high, according to the “2017 Survey of Fair Value Audit Deficiencies.” The analysis, done by the valuation and litigation consultancy firm Acuitas Inc., examines seven years of Public Company Accounting Oversight Board (PCAOB) inspection reports on auditing firms. Here are the key findings:

• The percentage of audit deficiencies has dropped since its dramatic peak in 2013—but remains quite high, at 31.6% of audits and other engagements examined.

• FVM audit deficiencies are increasingly attributable to a surge in business combination engagements. Fair value deficiencies cited related to business combinations increased to 68% in 2015, up from 56% in 2014. The PCAOB considers the robust pace of merger and acquisition activity to be an economic risk escalating the prospect of material misstatements.

• Based on the analysis by Acuitas, failures to assess audit risks as well as test internal controls and assumptions underlying prospective financial information are the root causes of most FVM and impairment audit deficiencies. The PCAOB links improvements to factors such as heightened responsiveness from management and the increased use of quality control aids.

• The June 2017 release of proposed auditing standard, Auditing Accounting Estimates, Including Fair Value Measurements, reinforces the PCAOB's commitment to seeing improvements in these areas.

"It's apparent that the number of audit deficiencies remains high, owing to a surge in deal-making activity," says Mark Zyla, a managing director of Acuitas. "But we are seeing industry and accounting firm leaders committing to more quality control measures and ensuring due professional care, hence the decline."