An Unimpeachably Neutral Message from the Standards Board Chair Reviewed by Momizat on . A Neutral Approach to Unimpeachable Standards C. Zachary Meyers, CPA. CVA, the author of this article, is NACVA’s Standards Board (SDB) Chair. The SDB was forme A Neutral Approach to Unimpeachable Standards C. Zachary Meyers, CPA. CVA, the author of this article, is NACVA’s Standards Board (SDB) Chair. The SDB was forme Rating: 0
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An Unimpeachably Neutral Message from the Standards Board Chair

A Neutral Approach to Unimpeachable Standards

C. Zachary Meyers, CPA. CVA, the author of this article, is NACVA’s Standards Board (SDB) Chair. The SDB was formed in 2016. The SDB’s purpose is to promulgate NACVA’s Standards, including the development of interpretations, amendments, restatements, and new releases of NACVA’s Standards as deemed necessary and prudent. While being able to influence the very rule governing one’s profession is an astute honor, the most rewarding role performed by the SDB is that of responding to questions that a member has asked or issue they are dealing with. This article discusses how standards must be followed, assessed, maintained, and developed in a neutral manner based upon consensus building and clearly defined objectives.

I have had the honor of serving on the first National Association of Certified Valuators and Analysts (NACVA) Standards Board (SDB) since 2016. The SDB’s purpose is to promulgate NACVA’s Standards, including the development of interpretations, amendments, restatements, and new releases of NACVA’s Standards as deemed necessary and prudent. While being able to influence the very rule governing one’s profession is an astute honor, the most rewarding role performed by the SDB is that of responding to questions that a member has asked or issue they are dealing with. This seventh article of the Unimpeachable Neutrality series discusses how professional standards must be followed, assessed, maintained, and developed in a neutral manner based upon consensus building and clearly defined objectives.

Double Standard

A wise man once told me that “standards are only important to those who make or violate said standards”. While this is an all too common perception related to standards across all industries, I could not agree more with this statement.

On balance, it is not the standards themselves that are important, but rather it is the desired outcome that the standard is meant to achieve for which every affected party should and must be concerned with or “care about”. A good example of this point in action is speeding tickets. When a cop pulls a driver over for speeding, it is highly unlikely that the individuals who set the speed limit did so because they love making the driver late for court. The reality is that the limit was set based upon the perceived risk of accidents exceeding a desired level at a higher speed. The county or state officials who helped set that speed limit on a road could care less about making you late, they just want to increase the likelihood you get where you are going alive.

Standard Deviation

A well-written standard may fail to accomplish its objective, mitigate risks targeted, or have no effect at all if it lacks a mechanism for compliance. Simply put, a standard may appear conceptually sufficient on paper but be fecklessly insufficient overall if a member’s compliance with said standard cannot be tested or risk mitigated through supplemental guidance. The most common standard violations and questions asked by members relate to general and ethical standard sections. This struggle to comply with or understand the general and ethical standards should not come as a surprise since these sections of the standards lack a clear and concise mechanism for compliance. Simply put, the reporting standards are easier to test for compliance because the inclusion or exclusion of an item within a valuation report is a factual test. If the report is lacking a disclosure or factual construct material to the estimated value or business,  then the analyst has some explaining to do. The same goes with the development standards as the documentation of the financial analysis done or considered is either present or absent from one’s file. This again may be relatively easy to test. General or ethical standards are hard and sometimes impossible to test, as there is no clear measure of whether my valuation was biased.

Standard of Care

Many of the questions asked by members relate to the extent of procedures necessary to prove or adequately consider data is enough, relevant, or reliable for the purpose of your valuation or calculation engagement to estimate value. Standards and any supplemental guidance should emphasize the purpose, function, form and surrounding facts of an engagement. Whether one is performing an estimate of value for a divorce or calculating damages in a personal injury case, the standards must not be viewed or interpreted in a vacuum leading you to ignore something material or relevant. Professional judgement must be centered upon an adequate foundation built upon all material or relevant facts and evidence. That said, it would be disingenuous at best for a member to ignore or agree to ignore something material or significant to the resulting value estimate. There are often legal arguments that go into an attorney’s position or desired approach to a value estimate or damage calculation that may or may not have substance. The most important thing a financial analyst can provide their client is a full understanding of their client’s vulnerabilities, options, or potential alternative outcomes that the court or other authority could ultimately decide.

One must emphasize that the most effective way to advise a client and/or the court is if the financial professional is aware of all the relevant facts and circumstances (good and bad) that the court or other authority could consider. Whether you are performing an investigation or litigation engagement, ignoring a relevant fact that you agreed not to consider, ask for, or know of may facilitate the mathematical wizardry your client wants but is feckless as a means to assist the court or anyone that matters.

Gold Standard

There is no one set of perfect rules or standards. This is true even in situations where there is only one set of standards or one standard setter. The most effective way to assess and maintain an effective set of professional, technical, or other standards is through a consensus building approach where all stakeholders, members, and knowledgeable parties are consulted regarding the proposed issue. This member-centered approach must consider all affected parties (members and non-members) to achieve consensus of thought.

The ultimate standard setter or acting organization must be cognizant of all the unrepresented and/or under-represented parties. No action or standard proposed, added, modified, or deleted should be based solely on what the standard setter wants to implement, unless those wants are in-line with the members, needs, and benefit.

Standard Bearer

The ability to help make our standards better is not limited to those individuals who sit on the standards or other boards. In fact, helping the membership have a better understanding of the standards does not require modification additions or deletions of any part of the standards. The goal is not to have perfect standards that are hard to assess or police for compliance, but rather the desired outcome should be to have a set of standards that are helpful, realistic, and result in the most desired objectives while mitigating the undesired risks voiced by the members, stakeholders, and the public.

Conclusion

In my capacity as Chair of the SDB, I ask all members to play their part in enhancing the standards by sending your thoughts or suggestions. Our Board has a duty to continuously assess the Standards such that we can provide timely guidance including the Professional Standards clarifications/interpretations published in a document entitled, “Frequently Asked Questions” (FAQs), posted on NACVA’s website along with our Standards.

If you have questions or areas of emphasis within the NACVA Standards that you feel need additional guidance or clarification, please do not hesitate to send me or NACVA Headquarters your question or suggestion. While members may choose to stay anonymous, the best questions may be added to a future version of the FAQs or discussed in a separate article.


Zachary Meyers, CPA, CVA, is a licensed Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA) who has been retained in over 1,700 engagements since 2011. Mr. Meyers has provided expert testimony and been qualified in federal district courts, circuit courts, family law courts, and the West Virginia Human Rights Commission as an expert in business valuation, forensic accounting, pension valuation, and taxation. Mr. Meyers was elected by NACVA membership to the first National Association of Certified Valuators and Analysts (NACVA) Standards Board in 2016, appointed Vice-Chair in 2017, and Chair in 2018 and 2019.

Mr. Meyers can be contacted at (304) 690-2619 or by e-mail to czmcpacva@CZMeyers.com.

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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