The three elements that I would like to mention are the following:
Professional Competence: c at a minimum, a CPA should consider 1. subject entity and its industry. c
2. subject matter. 3. c 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: c 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: c The principle of objectivity imposes the obligation to be
impartial, intellectually honest, disinterested, and free from conflicts of interest. c 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. c
The standards guide CPAs to help ensure they perform services consistently and ethically. c However,
the article in the CPA Journal states that the two sets of standards are not consistent and that this
will create a problem.
Working in audits, I find that the GASB and FASB standards for nonprofit and governmental audits
are much the same as the valuation standards. c I think there are a few that are very important.
Professional competence is being sure that you can complete the job you are required to do. c
Anyone who hires a professional for a service wants to make sure they are hiring a person who can
do the job they need properly. c Hiring a contractor to build a house is the same as hiring an auditor
or a valuation consultant, you want to make sure that they can perform the necessary tasks to
complete the job the best that it can be done.
Another standard that is similar in valuation and audits is being independent of the valuation or
audit. c When writing a report for value, the person performing the service should not have any
vested interest in the business. c Much the same with an audit, if the person writing the report is
involved with the business, they may feel pressure to skew the data one way or another for their
own good.
Establishing understanding with the client is also important so all involved know the scope of the
project and the expectations that are to be reached. The use of an engagement letter is a good
practice to list the services that will be performed and then add items as necessary for each project
and have both parties sign and agree on all items.
Reference:
AICPA (2007). Statement on standards for valuation services. Retrieved from
https://www.aicpa.org/resources/download/statement-on-standards-for-valuation-services-vs-
section-100
https://www.aicpa.org/resources/download/statement-on-standards-for-valuation-services-vs-
section-100
http://archives.cpajournal.com/2008/108/essentials/p22.htm
