Major elements required in the statement on standards for valuation services SSVS are
professional competence, objectivity, and conflict of interest, and lastly, establishing an
understanding with the client.
Professional competence ensures that the you can complete your job accurately. It ensures
that the person hired for the job knows what they are doing so that it can be complete the
tasks they were hired for.
Objectivity and conflict of interest help to make sure the analyst does not have a conflict
of interest while completed assigned job that could pose a risk to the outcome of the
analysis. They need to remain completely object of the situation so that they complete
their job honestly.
Establishing an understanding with the client is used to explain what the is expected to be
performed that way there is no confusion on either parties’ side. This does not mean it is
set in stone, if things need to be adjusted adjustments can be made if things come up.
Three of the major elements required in the statement on standards for valuation services
(SSVS) include:
1) Establishing an Understanding with the Client --- "The valuation analyst should
establish an understanding with the client, preferably in writing, regarding the engagement
to be performed. If the understanding is oral, the valuation analyst should document that
understanding by appropriate memoranda or notations in the working papers". This refers
to the importance of establishing what services will be performed for the client and
documentation that both the client and analyst understand the scope of work to be
performed. Having this in writing keeps all interested parties informed of what the
expectations are for this work.
2) Scope Restrictions or Limitations --- "A restriction or limitation on the scope of the
valuation analyst’s work, or the data available for analysis, may be present and known to
the valuation analyst at the outset of the valuation engagement or may arise during the
course of a valuation engagement. Such a restriction or limitation should be disclosed in
the valuation report". This refers to the possibility of information or data that won't be
available for the analyst in the process of the valuation work they will be performing. d This
could be because the data simply isn't available or because the client will not provide it for
some reason. This needs to be noted in the valuation report.
3) Objectivity and Conflict of Interest --- "The code requires objectivity in the
performance of all professional services, including valuation engagements. Objectivity is a
state of mind. The principle of objectivity imposes the obligation to be impartial,
intellectually honest, disinterested, and free from conflicts of interest. Where a potential
conflict of interest may exist, a valuation analyst should make the disclosures and obtain
consent as required by the “Conflicts of Interest" interpretation". This means the valuation
analyst must perform the work with an impartial lens. If there is any bias or conflict of
interest on the part of the analyst, this must be disclosed before the start of work and
should only move forward if consent is given by the client. d You lose the confidence of the
current and future clients if they learn later that there was any dishonesty on the part of the
analyst.
SSVS elements are comparable with the standards set by other standard-setting bodies in
that they all have set these guidelines requiring accuracy and integrity on the part of the
analyst. Sharing these similar standards allows for consistency across the board for
analysts and clients should feel confidence in knowing a valuation analyst is bound by
these standards.
The three elements I would like to discuss are:
1. Establishing an Understanding with the Client: By providing your client with an
engagement letter or some formal consent will reduce the possibility that either the
valuation analyst or client may misinterpret the needs or expectations of the other
party. Also, the understanding 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).
2. Objectivity and Conflict of Interest: This just states that you as the valuation
analyst should perform your duties without prejudices. The principle of objectivity
imposes the obligation to be impartial, intellectually honest, disinterested, and free
from conflicts of interest (AICPA, 2007). It states if there is a conflict of interest,
the valuation analyst should make disclosures and obtain consent as required.
3. Professional Competence: This states that you do the job accordingly just as your
know-how. A valuation analyst should possess a level of knowledge of valuation
principles and theory and a level of skill in the application of such principles that
will enable him or her to identify, gather, and analyse data, consider, and apply
appropriate valuation approaches and methods, and use professional judgment in
developing the estimate of value (ACIPA, 2007).
SSVS applies the same general and ethical standards as other standard-setting bodies.
These guidelines help hold accountants accountable by ensuring they are accurate and
conducting their work with the highest form of integrity.
The three elements that I would like to mention are the following:
Professional Competence: at a minimum, a CPA should consider 1. subject entity and its
industry. 2. subject matter. 3. valuation date. 4. scope of the valuation engagement. 4. any
government regulations that apply to the subject interest.
Nature and Risk of the Valuation Services: CPA should consider the following: Terms
of the valuation engagement, identity of the client, nature of the business interest and
ownership rights security or intangible assets being valued and the degree of marketability
of the interest, procedural requirements of a valuation engagement and the intent, the use
of and limitations of the report and the conclusion or calculated value, and any obligation
to update the valuation.
Objectivity and Conflict of Interest: The principle of objectivity imposes the obligation
to be impartial, intellectually honest, disinterested, and free from conflicts of interest.
Independence and Valuation to me seem the same as this element in that you would need
to be free of conflicts of interest and be impartial. d
The standards guide CPAs to help ensure they perform services consistently and ethically.
However, the article in the CPA Journal states that the two sets of standards are not
consistent and that this will create a problem.
https://www.aicpa.org/resources/download/statement-on-standards-for-valuation-services-
vs-section-100
http://archives.cpajournal.com/2008/108/essentials/p22.htm
AICPA. (2007). Valuation Servies. Retrieved on June 30, 2022, from:
https://www.aicpa.org/resources/download/statement-on-standards-for-valuation-services-
vs-section-100
