“When I look at your appraisal, I pull up the report writing guidelines and BV standards from your society, and see if you've complied,” says Patrick McKay, ASA, AVA—a Senior Valuation Specialist with the IRS, who spoke last week at the Second Annual IRS National Symposium on Valuation Issues in Los Angeles. If there’s no compliance, “that’s the first warning that due diligence levels were not met.”

His next step: “Find the five to ten key assumptions [in the report]. Did the appraiser clearly lay these out for me—or put them in a footnote?” Why is this important? “You’d do the same in reviewing an IRS report,” McKay says. “It’s worth your while to flesh out the assumptions in your narrative; don’t imbed them in the spreadsheets. If you can do this up front, it will save you and your client a lot of trouble.” In fact, if these BV standards are met and assumptions are clearly laid out and supported, “I usually tell the examiner: ‘Looks good to me,’ and close the file.”

McKay was also recently promoted to National Business Valuation Issue Coordinator, one of two such positions in the IRS Engineering Program; his duties include internal education as well as professional outreach, to make sure “valuation issues are being worked consistently across the country.” For an overview of the Engineering Program, which now boasts 340 professionals—including their training and examination of expert reports, click here.