Skip to content

CMA Final · Strategic Performance Management and Business Valuation · Laws and Compliance in Business Valuation

A valuer's report on a company's shares dated 31 March relies on the audited balance sheet of the previous year and ignores a major fire loss that occurred in February. Which valuation principle is most directly breached, as per the Valuers Rules' emphasis on diligence and the Code of Conduct?

The breach is failure to exercise due diligence by ignoring material information up to the valuation date. A valuer must consider significant known events such as a fire loss; relying only on stale audited figures makes the report unreliable. Stating the date or appointment by the audit committee is proper.

  1. AFailure to exercise due diligence and to consider material information available up to the valuation dateCorrect
  2. BUse of the income approach instead of the asset approach
  3. CDisclosure of the valuation date in the report
  4. DAppointment of the valuer by the audit committee

Explanation

The Code of Conduct requires the valuer to act with due care and to take into account material facts known before the report. Ignoring a significant February fire loss is a lapse of diligence. Choosing an approach, stating the date or the appointment route is not a breach.

Did you get it right without looking?

One question tells you little. A timed set on Laws and Compliance in Business Valuation shows your real accuracy, how long you take and where you lose marks.

Practise Laws and Compliance in Business ValuationFree diagnostic mock

More Laws and Compliance in Business Valuation questions