CGA Ethics Standards & Legal Compliance 4 — Questions and Answers
Question 1: A gemologist discovers mid-appraisal that they lack the expertise to properly grade an unusual colored gemstone. According to USPAP, the correct course of action is to:
- Complete the appraisal with a general estimate and add a disclaimer
- Acquire the necessary competency, disclose the limitation, or decline the assignment (Correct answer)
- Refer the client to a competitor without explanation
- Charge a reduced fee and provide a best-guess valuation
Correct answer: Acquire the necessary competency, disclose the limitation, or decline the assignment
USPAP's Competency Rule requires appraisers to either gain competency before accepting the assignment, disclose limitations to the client, or withdraw from the assignment.
Question 2: In the context of estate appraisals, the IRS requires appraisals of donated property valued over $5,000 to be performed by:
- Any licensed jewelry store owner
- A qualified appraiser as defined by IRS regulations (Correct answer)
- A certified public accountant
- The estate's attorney of record
Correct answer: A qualified appraiser as defined by IRS regulations
IRS regulations require that non-cash charitable contributions over $5,000 be appraised by a qualified appraiser who meets specific education and experience criteria.
Question 3: Which of the following best describes the ethical issue with 'appraisal shopping'?
- Clients comparing prices from multiple appraisers
- A client seeking multiple appraisals until finding one with the desired inflated value (Correct answer)
- Using several reference guides to establish market value
- Consulting peer appraisers for a second opinion
Correct answer: A client seeking multiple appraisals until finding one with the desired inflated value
Appraisal shopping occurs when clients solicit multiple appraisals to find an appraiser willing to provide a desired value, undermining the integrity of the process.
Question 4: The Americans with Disabilities Act (ADA) requires jewelry appraisal businesses open to the public to:
- Offer discounted appraisal fees for customers with disabilities
- Provide equal access to services and remove barriers for customers with disabilities (Correct answer)
- Hire a minimum percentage of employees with disabilities
- Appraise accessibility devices at no charge
Correct answer: Provide equal access to services and remove barriers for customers with disabilities
The ADA requires places of public accommodation to ensure equal access to their services and make reasonable accommodations for individuals with disabilities.
Question 5: When an appraisal is used for both insurance and charitable donation purposes, USPAP requires the appraiser to:
- Use the highest defensible value for both purposes
- Recognize that different intended uses may require different value definitions and methodologies (Correct answer)
- Charge double the standard fee
- Obtain written approval from both the insurer and the charity
Correct answer: Recognize that different intended uses may require different value definitions and methodologies
Different intended uses of appraisals (insurance vs. donation) may require different value definitions, and a single report may not serve both purposes appropriately.
Question 6: A jewelry store owner asks their in-house gemologist to appraise estate jewelry the store is considering purchasing. What ethical issue does this present?
- None, as in-house appraisals are standard industry practice
- A conflict of interest, since the appraiser's employer has a financial stake in the outcome (Correct answer)
- A USPAP violation because only independent appraisers can assess estate jewelry
- A legal issue because estate jewelry requires probate court authorization
Correct answer: A conflict of interest, since the appraiser's employer has a financial stake in the outcome
When an appraiser's employer benefits financially from the appraisal outcome, an inherent conflict of interest exists that must be disclosed to all parties.
Question 7: Which of the following statements about the Kimberley Process Certification Scheme (KPCS) is accurate for US-based gem appraisers?
- It requires US appraisers to certify that all diamonds are conflict-free
- It is an international certification scheme that restricts trade in rough conflict diamonds (Correct answer)
- It applies only to colored gemstones, not diamonds
- It was abolished by the United Nations in 2020
Correct answer: It is an international certification scheme that restricts trade in rough conflict diamonds
The Kimberley Process is an international government initiative to prevent conflict diamonds from entering the mainstream rough diamond market.
CGA Ethics Standards & Legal Compliance 4
A gemologist discovers mid-appraisal that they lack the expertise to properly grade an unusual colored gemstone.
According to USPAP, the correct course of action is to: