Do Business Valuation Standards Apply to Non-BV Accredited CPAs?
Will the valuation report prepared by the non-accredited CPA be admitted?
The author was recently involved in an Oklahoma domestic relations case where the opposing expert contended he did not have to abide by AICPA standards, reporting or otherwise, since he was not a member of the organization. This article summarizes how this issue was handled by the Oklahoma judge.
In this time of business valuation organizations promulgating standards at a level that seem to some to be â€śstandards overloadâ€ť, the question of whether any of these standards (ASA, NACVA, IBA, AICPA, etc) apply to an expert CPA valuator may seem somewhat farfetched. This, however, became the pivotal point in a recent court case involving an accredited valuation expert and a CPA expert who, while non-accredited, was an experienced valuator with extensive testimony experience. I was recently involved in a marital dissolution case in Oklahoma where the expert on the other side was a CPA. He was not a member of any business valuation accrediting organization or an AICPA member. He took the position that he was not bound by any of the organizational standards including Statement on Standards for Valuation Services (SSVS) No. 1. In defense of this position, the counsel that retained him pointed out that while the expert was a CPA, he was not a member of the AICPA or any other standards issuing organization. To further bolster this argument, the portion of Paragraph No. 1 of SSVS 1 stating, â€śThis Statement establishes standards for AICPA membersâ€¦,â€ť was read into the record. Does SSVS No. 1 apply to a CPA that is not an AICPA member? The answer is, it depends.
In this case, the CPA expertâ€™s argument was not upheld and it was found that AICPA standards did, in fact, apply to his work. The finding was based on the fact that the state board of accountancy issuing the expertâ€™s license to practice had included in its statutory requirements the statement, â€śâ€¦registrant shall conform in fact and appearance to the AICPA Code of Professional Conduct,â€ť thereby making all CPAâ€™s in the state subject to AICPA standards even though they may not be members of the AICPA. The vast majority (approximately 75 percent) of the states have adopted similar requirements in their statutes or rules. Had this case been heard in one of the states that make up the remaining 25 percent, the CPA expertâ€™s substandard work product might have been admitted absent a successful Daubert challenge. As demonstrated by this case, it is imperative that everyone involved in the valuation and litigation process be aware of not only the necessary professional standards, but also how they are applied.
Nick L. Gales CPA, CVA, ABV, CFF, MAFF is a seasoned valuator who has testified in many Federal and state cases. He has served on numerous NACVA boards and committees, as well as being recognized as a NACVA Instructor of Distinction for five consecutive years.