Question

_ engagements are created to value a business, business ownership Interest, security, or intangible asset. Similar to the estimates associated with commercial damages, in the case of these engagements, the work of the forensic accountant requires professional Valuation competence and judgment Before and after communication Yardstick certification Loss period; skepticism

Answer 1

Answer:

Valuation engagements are created to value a business, business ownership interest, security or intangible asset, similar to the estimates associated with commercial damages, in the case of these engagements the work of the forensic accountant requires professional competence and judgement.

Explanation:

Valuations of businesses, business ownership interests, securities, or intangible assets may be performed for a wide variety of purposes including the following:

1. Transactions (or potential transactions), such as acquisitions, mergers, leveraged buyouts, initial public offerings, employee stock ownership plans and other share based plans, partner and shareholder buy-ins or buyouts, and stock redemption.

2. Litigation (or pending litigation) relating to matters such as marital dissolution, bankruptcy, contractual disputes, owner disputes, dissenting shareholder and minority ownership oppression cases, and employment and intellectual property disputes

3. Compliance-oriented engagements, including (a) financial reporting and (b) tax matters such as corporate reorganizations; S corporation conversions; income, estate, and gift tax compliance; purchase price allocations; and charitable contributions

4. Planning oriented engagements for income tax, estate tax, gift tax, mergers and acquisitions, and personal financial planning

In recent years, the need for business valuations has increased significantly. Performing an engagement to estimate value involves special knowledge and skill. Given the increasing number of members of the AICPA who are performing business valuation engagements or some aspect thereof, the AICPA Consulting Services Executive Committee has written this standard to improve the consistency and quality of practice among AICPA members performing business valuations. AICPA members will be required to follow this standard when they perform engagements to estimate value that culminate in the expression of a conclusion of value or a calculated value. The Consulting Services Executive Committee is a body designated by AICPA Council to promulgate professional standards under the “General Standards Rule” (ET sec. 1.300.001 and 2.300.001) and the “Compliance with Standards Rule” (ET sec. 1.310.001 and 2.310.001) of the AICPA Code of Professional Conduct (the code).

The “General Standards Rule” of the code (ET sec. 1.300.001 and 2.300.001) states that a member shall "undertake only those professional services that the member or the member's firm can reasonably expect to be completed with professional competence." Performing a valuation engagement with professional competence involves special knowledge and skill. 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 analyze data, consider and apply appropriate valuation approaches and methods, and use professional judgment in developing the estimate of value (whether a single amount or a range). An in-depth discussion of valuation theory and principles, and how and when to apply them, is not within the scope of this statement.

Thank you.