Should BV analysts be responsible for 3rd party specialists?

BVWireIssue #51-1
December 6, 2006

And not so surprisingly, the AICPA’s proposed Statement on Standards for Valuation Services created quite a buzz at the Association’s 2006 National Business Valuation Conference, which just wrapped up yesterday in Austin, Texas. One provision that keeps “cards and letters flowing,” said presenter Ron Seigneur, concerns the use of a third party’s work. In particular, if a valuation analyst hires a specialist (such as a real estate or machinery appraiser) then the proposed Standards require an analyst to evaluate the specialist’s qualifications, including education and experience. Many BV professionals are understandably reluctant to evaluate another professional’s background.

“Some clarification may be in order,” agreed co-presenter W. James Lloyd. The way he reads it: If the specialist’s work is material to the valuation conclusion, then the analyst must perform due diligence, to determine whether the specialist has done an adequate job—and to impress upon clients the need for more than just “drive by” appraisals.

But if analysts routinely disclaim responsibility for auditors’ work or management financials, why must they treat the work of third party experts any differently? “We need your comments, input, and help” on the proposal, Ed Dupke, chair of the Standards task force, told the 900 AICPA attendees. The comment period on the exposure draft ends December 15, 2006, with an effective date planned for mid-2007; see BVWire #50-3, which contains a direct link to the Standards.

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