Certified Valuation Analyst CVA Professional Standards and Ethics 2 — Questions and Answers
Question 1: Under NACVA Professional Standards, what is the primary purpose of a 'Calculation Engagement' as distinct from a 'Valuation Engagement'?
- To apply only the procedures agreed upon with the client and arrive at a calculated value (Correct answer)
- To produce a conclusion of value supported by all applicable approaches
- To provide tax-only opinions for the IRS
- To perform a full forensic audit of the entity
Correct answer: To apply only the procedures agreed upon with the client and arrive at a calculated value
A Calculation Engagement applies only agreed-upon procedures to reach a 'calculated value,' not a comprehensive conclusion of value.
Question 2: A CVA discovers that a client wants the analyst to predetermine a value to support a litigation position. What does the NACVA ethics code require?
- Decline to accept any predetermined or contingent outcome that impairs objectivity (Correct answer)
- Accept the engagement if the fee is sufficient
- Proceed but disclose the bias in a footnote
- Refer the client to a non-credentialed appraiser
Correct answer: Decline to accept any predetermined or contingent outcome that impairs objectivity
NACVA standards prohibit accepting engagements where a predetermined value impairs the member's objectivity and independence.
Question 3: Which document type under NACVA standards summarizes results with limited disclosure and is appropriate for a Calculation Engagement?
- Calculation Report (Correct answer)
- Detailed Report
- Summary Report
- Comprehensive Conclusion Report
Correct answer: Calculation Report
A Calculation Engagement is reported via a Calculation Report, which carries limited disclosure requirements.
Question 4: What standard requires a CVA to retain engagement documentation for a minimum period to support the conclusions reached?
- The records retention provision of the Professional Standards (Correct answer)
- The Sarbanes-Oxley audit rule
- The GAAP disclosure standard
- The IRS Circular 230 only
Correct answer: The records retention provision of the Professional Standards
NACVA Professional Standards include a records retention requirement so documentation supports the analyst's conclusions.
Question 5: A CVA is offered a contingent fee tied to the size of the valuation conclusion in a divorce matter. This is:
- Prohibited because it impairs independence and objectivity (Correct answer)
- Permitted if disclosed to the court
- Permitted in family law only
- Required by NACVA for litigation work
Correct answer: Prohibited because it impairs independence and objectivity
Contingent fees based on the valuation outcome are prohibited as they impair objectivity.
Question 6: Under NACVA standards, what must an analyst do before relying on a specialist's report (e.g., a real estate appraiser)?
- Assess the specialist's qualifications and the reasonableness of their work (Correct answer)
- Automatically accept it without review
- Re-perform the entire specialist analysis
- Ignore it to preserve independence
Correct answer: Assess the specialist's qualifications and the reasonableness of their work
The analyst must evaluate the specialist's professional qualifications and the reasonableness of their conclusions before relying on them.
Question 7: What is the appropriate course of action when a CVA lacks the competence to complete a specialized portion of an engagement?
- Obtain the needed competence, associate with a qualified person, or decline the work (Correct answer)
- Complete it anyway and disclaim liability
- Outsource it secretly without disclosure
- Reduce the scope without telling the client
Correct answer: Obtain the needed competence, associate with a qualified person, or decline the work
The competence standard requires gaining the skill, partnering with a qualified professional, or declining the engagement.
Certified Valuation Analyst CVA Professional Standards and Ethics 2
Under NACVA Professional Standards, what is the primary purpose of a 'Calculation Engagement' as distinct from a 'Valuation Engagement'?