These include investment bankers, credit rating agencies, financial statement preparers, the US Federal Reserve, investors, loan originators, auditors, and borrowers among others.
These assets are classified as either "held-for-investment," which is typically a small percent of the loans, or "held-for-sale", accounted for at the lower of historical cost or fair value.
Ultimately, most of the assets held by financial institutions were either not subject to fair value, or did not impact the income statement or balance sheet accounts.
Opponents, such as FDIC chairman William Isaac and House Speaker Newt Gingrich, lobbied and urged for the suspension of mark-to-market accounting.
One argument is that a majority of structured debt, corporate bonds and mortgages were still performing, but their prices had fallen below their true value due to frozen markets (contagion explained above).
[6] Opponents also state that fair value accounting undermines critical foundations of financial reporting, including verifiability, reliability and conservatism.
[7] Some opponents may even suggest that historical cost accounting is more accurate by arguing that financial institutions are forced to record any permanent impairment in the market value of their assets.
The primary driver of audit demand is the desire to enhance credibility of the information that companies make available to their potential investors.
Without an independent party verifying and providing an opinion on a company's financial statements, it is significantly more difficult for firms to attract the investment of the uninformed public.
It is, therefore, in a company's best interest to have an individual outside of the firm perform an audit in order to provide assurance on the reliability of the information made available to the public.
Therefore, sellers of high quality products will not be able to get the value that they want from buyers and have no choice but to withdraw from the market unless they are willing to receive an unfair price.
The financial crisis showed evidence of this theory as investors couldn't decipher between securities that were backed by high quality or sub-prime home loans.
It is likely that had better information been made available to investors, they would have stayed away from the investments backed by these bad mortgages, or at minimum would have demanded higher yield rates.
For this reason, it is crucial for auditors to plan the audit engagement in such a way that they can obtain a great understanding of the client's business, and in particular, areas that are susceptible to high levels of risk.
Auditors provide assurance on whether the information included in a company's financial statements is free of material misstatement, disclosed properly, and is in conformance with Generally Accepted Accounting Principles.
Because of their high levels of skill and expertise, an auditor's opinion carries significant weight in helping mitigate the risk of information gaps in the market.
The ability to learn from mistakes made during the financial crisis could help auditors plan future engagements in a way that minimizes the likelihood of overlooking key factors in the audit.
[15] Although it is unlikely that audit failures will ever be eliminated, if firms adopt this type of approach it is realistic to think that crises in the future will not leave such drastic results.