BCA Quality Assurance & Compliance 3 — Questions and Answers
Question 1: A business appraiser is asked to perform a desk review of another appraiser's report. The desk review should be performed in accordance with:
- USPAP Standards Rules 3 and 4 (Correct answer)
- USPAP Standards Rules 9 and 10 only
- IRS Revenue Ruling 59-60 solely
- NACVA Professional Standards Chapter 5
Correct answer: USPAP Standards Rules 3 and 4
USPAP Standards Rules 3 and 4 govern appraisal review, which includes desk reviews of business appraisal reports.
Question 2: Which of the following is NOT an acceptable reason for an appraiser to deviate from a typical appraisal approach in a business valuation?
- The approach is not applicable given the subject's characteristics
- The necessary data is unavailable after reasonable research
- The client prefers a higher value outcome from a specific approach (Correct answer)
- The approach would provide misleading results in context
Correct answer: The client prefers a higher value outcome from a specific approach
Client preference for a higher value is never a legitimate reason to omit or deviate from an applicable approach, as it would compromise independence.
Question 3: Under the BCA credential standards, a compliance officer reviewing an appraisal report should check that the report contains all of the following EXCEPT:
- A signed certification by the appraiser
- The effective date of the appraisal
- A guarantee that the concluded value will not change (Correct answer)
- The identity of the intended users
Correct answer: A guarantee that the concluded value will not change
Appraisers cannot and must not guarantee value conclusions; reports must be presented as professional opinions, not guarantees.
Question 4: A business appraiser with a conflict of interest who fails to disclose it to the client is most directly violating the USPAP Ethics Rule section on:
- Confidentiality
- Conduct (Correct answer)
- Management
- Competency
Correct answer: Conduct
The Conduct section of USPAP's Ethics Rule requires appraisers to disclose conflicts of interest that could compromise impartiality.
Question 5: When reviewing a business appraisal for compliance, which area is MOST critical to verify under the income approach?
- Number of employees reported in the subject company
- Support for the selected discount or capitalization rate (Correct answer)
- Physical condition of the company's equipment
- The date the business was incorporated
Correct answer: Support for the selected discount or capitalization rate
The discount or capitalization rate is the most sensitive assumption in the income approach and must be well-supported to withstand quality review.
Question 6: A BCA appraiser preparing a restricted appraisal report must ensure that:
- All data, reasoning, and analyses are fully disclosed in the report
- The report is only provided to and intended for use by the client (Correct answer)
- The report is submitted to the federal appraisal registry
- A second appraiser co-signs the report
Correct answer: The report is only provided to and intended for use by the client
A restricted appraisal report is intended only for the client and cannot be understood without additional information held in the workfile.
Question 7: Which of the following best describes a 'material' error in a business appraisal report for compliance purposes?
- Any typographical error regardless of impact
- An error that would cause a reasonable user to reach a different conclusion (Correct answer)
- An error identified after the appraisal fee has been paid
- An omission of a table of contents
Correct answer: An error that would cause a reasonable user to reach a different conclusion
A material error is one that, if corrected, would likely change the conclusions or decisions of a reasonable intended user.
BCA Quality Assurance & Compliance 3
A business appraiser is asked to perform a desk review of another appraiser's report.
The desk review should be performed in accordance with: