This study investigates the value relevance of fair value estimates across all levels of the International Financial Reporting Standards (IFRS) 13 hierarchy. It examines how audit quality characteristics - such as audit firm size, audit fees, the use of valuation specialists, auditor rotation, and the timeliness of audit reports - are associated with the value relevance of these estimates. Based on a sample of 438 observations from UK-listed investment funds between 2017 and 2022, the study finds that all levels of the fair value hierarchy are value-relevant to investors, with no significant differences in value relevance across these levels. Additionally, firms audited by Big 4 auditors show higher value relevance for fair value assets across all levels. The study also identifies a positive association between audit fees and the value relevance of fair value assets, particularly for Level 2 and Level 3 estimates. The involvement of valuation specialists has a significantly positive impact only on Level 1 assets, with no significant effect on Levels 2 and 3. Finally, auditor rotation and the timeliness of audit reports do not significantly affect the value relevance of fair value estimates at any level of the hierarchy.
Keywords: IFRS 13; Fair Value Hierarchy; Value Relevance; Audit Quality.
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