There are many elements required in the statement on standards for
valuation services (SSVS). Here are just a few:
1. Professional Competence – Simply put, anyone engaging in valuations
should have the skill and knowledge to do so. The valuation analyst will
need to identify, gather, and analyse data to determine the
appropriate valuation method to use. “The valuation analyst must
determine if they can reasonably expect to complete the valuation
with professional competence by considering the following: subject
entity and its industry, subject interest, valuation date, scope of the
valuation engagement, and governmental regulations or other
professional standards that apply to the subject interest.” (AICPA,
2007)
2. Nature and Risk of the Valuation Services – In order to determine the
nature and risk, the analyst should factor “the terms of the valuation
engagement; identity of the client; nature of the business interest and
ownership rights in the business, security, and intangible assets being
valued, including control characteristics and the degree of
marketability of the interest; procedural requirements of a valuation
engagement and the extent of any limitations imposed by the client or
circumstances; the use of and limitations of the valuation report; and
any obligation to update the valuation report in the future.” (Robbins &
Taylor, 2008)
3. Objectivity and Conflict of Interest – The analyst should always remain
objective and not engage in any activity that would pose as a conflict of
interest. The analyst must always remain impartial while displaying
integrity and honesty.
4. Establishing an Understanding with the Client – The analyst should
prepare an engagement letter outlining an understanding with the
client. This written document will help to reduce any
misinterpretations or expectations between the analyst and the client.
This “should include the nature, purpose, and objective of the
valuation engagement, the client’s responsibilities, the valuation
analyst’s responsibilities, the applicable assumptions and limiting
conditions, the type of report to be issued, and the standard of value to
be used.” (AICPA, 2007)
Special knowledge and skill are necessary to complete a business
valuation. Over the years, the need for this type of service has grown.
Therefore, the SSVS was written “to improve the consistency and quality
of practice among AICPA members performing business valuations.”
(AICPA, 2007) Members are required to follow these standards. The SSVS
is like other standard setting bodies in that they all provide guidance to
the accountant with a focus on quality and uniformity in reporting
business valuations. Each standard calls for accuracy and integrity from
those performing the valuations.
References:
AICPA (2007). Statement on Standards for Valuation Services (VS Section
100). Retrieved from
https://www.aicpa.org/resources/download/statement-on-standards-
for-valuation-services-vs-section-100
Robbins, W. & Taylor, G. (2008, June). SSVS 1: Applying New Standards for
CPAs Providing Valuation Services. Retrieved from
http://archives.cpajournal.com/2008/608/essentials/p54.htm
