Preventative Measures to Avoid Complaints and Risk—Fourth Quarter 2022

Preventative Measures to Avoid Complaints and Risk
Shelia Darby, MBA, CVA, MAFF
NACVA Ethics Oversight Board

Have you ever wondered or worried—even once—about the reasons why ethical complaints are submitted to the NACVA Ethics Oversight Board (EOB) or how you might mitigate the risk of having a complaint submitted about you and your work? This article is intended to give you a peek behind the curtain by unveiling some helpful preventive measures to employ in your practice, set aside your fears, and avoid ethical complaints.

Maintain Your Certifications
Surprisingly, one of the most common complaints against NACVA members is regarding expired certifications. For example, you cannot use the “CVA” or “MAFF” designation behind your name or on your letterheads, reports, social media accounts, etc. if your certification is expired or in poor standing. You can check the status of your designation by logging into your NACVA account or by using NACVA’s Online Directory. You can learn more about recertification on NACVA’s website here.

Follow NACVA Guidelines
This should be simple, but even the most experienced sometimes forget to frequently review the standards that they are attesting to follow. NACVA provides members with professional standards, checklists, FAQs, articles, and videos to help ensure our continued understanding of the standards and ethical guidelines.

As an example, when a complaint is brought forward to the EOB regarding a valuation engagement, one key step in the EOB’s review is checking for adherence to the Professional Standards, and one tool used to aid EOB's review of valuation-related complaints is the Business Valuation Scenario Experience Requirement Scoring Key. The Scoring Keyis given to CVA candidates and CVAs to ensure their oral and written reports include the most critical elements as well as the information required in key report sections (e.g., qualitative and quantitative sections). Here are some of my favorite aids and tools provided by NACVA:

• NACVA's Professional Standards Website
• Business Valuation Scenario Experience Requirement Scoring Key (PDF)
• NACVA Professional Standards
  For engagements accepted on or after June 1, 2017: (PDF) and related FAQs
  For engagements accepted on or after August 1, 2015: (PDF) and related FAQs
  For engagements accepted before August 1, 2015, visit NACVA's Professional Standards website for a list of the applicable standards
• Standards FAQ Library—including litigation and non-litigation questions (see the list)
• Business Valuation Standards Resource Tools—within a downloadable ZIP file available to members who are logged into their NACVA accounts—include:
  Business Valuation Development Checklist (PDF and Word)
  Business Valuation Reporting Checklist for Detailed Reports (PDF and Word)
  Sample Engagement Letters for Valuation Engagements, Calculation Engagements, and Litigation Engagements
• Recommended Training
  Industry Standards and Ethics (link)
  Current Update in Valuations (link)
  Report Writing: Review and Analysis (link)
  Litigation Report Writing Workshop (link)
  Best Practices in Business Valuation: A Practical Approach to Advanced Issues and Applications (link)

Do the Work
This should come as no surprise but, when you agree to perform an engagement for your client, you need to be prepared to do the work. The EOB has received complaints of varying themes over the years and the root cause can sometimes be traced to not doing the work. For example, if you accept an engagement to provide a valuation update for a previous valuation you performed, be thorough and be sure to update all qualitative and quantitative sections. Suggestions include conducting new interviews with owners and management, as well as updating information such as the industry analysis, subject company's financials, benchmarking, comparable transactions used for a market approach valuation, components of the cost of equity, forecast of the benefit stream, etc. Be sure to cite your sources and the date of the source information.

Stay Neutral
Your ability to stay neutral and base your conclusions on facts and reasonable assumptions will help ensure you have a long and respected career. My tenure on the EOB has reinforced my belief in these three simple principles:

• Do not advocate
• Do not make it personal
• Avoid inflammatory language

My personal observation is that these three items are at the center of most complaints received by NACVA, which oftentimes involved a litigation-related engagement.

When you are hired as an expert witness, remember that your key client—not your paying client—is always the trier of fact. Pursue truth; this means using data and information honestly and transparently (i.e., do not manipulate data to tell a story that your paying client wants you to tell).

Do not make your testimony or written reports about attacking other experts by saying rude and offensive comments. Instead, focus on method and assumptions. You will find yourself building credibility with triers of fact and attorneys when you stay calm, keep to the facts, and remove ill-mannered comments.

Last, but not least, avoid inflammatory language (e.g., grossly, extremely, never, etc.). Inflammatory language can often leave the trier of fact or opposing counsel and expert witness(es) with a feeling that you are biased, and your conclusion is rooted in an advocacy position.

Invest Time in Quality Assurance
Every engagement you undertake should include time for quality assurance. Whether you are a solopreneur providing valuation and forensics support from your home office or an employee at a mid-to-large company, make the time for quality assurance. If you are working from your home office, one suggestion is to have a thorough checklist and/or workpaper to ensure your report covers the key fundamentals. You can also ask a friend or colleague to read your report, ensuring that it is written coherently and logically.

Here are some tips that have proved helpful to me over the years:

• Use workpapers. Document your process, thoughts, and sources with workpapers. Workpapers, if done well, can serve as the blueprint to the reviewer of your work.
• Make quality assurance fun (and not scary)! Quality assurance should never be scary. Superior quality assurance provides a safe place for continued education. One idea is to make errors—whether grammatical nits or big calculation busts—fun to find. For example, at my firm, every report is reviewed by someone not on the engagement team before it is issued. We affectionately call the report review process "going Easter egg hunting." Our goal is to find as many errors (i.e., Easter eggs) as possible during the review process. Every so often, we find a "golden egg"—meaning something significant was found like a calculation error. This has made reviews less daunting for the person having their work reviewed and an opportunity for continued learning for all those involved.
• Have a mentor and/or thought partner on speed dial. Everyone should have a mentor or someone they can discuss ideas and issues with. This person can be someone in your company or on the outside. It is up to you who the person is but be sure to find a mentor if you do not have one already. As importantly, be willing to provide help and guidance to others who may need it. If you feel you need support that you cannot find from your network, then you can use NACVA's Mentor Support Exchange to find answers from experts. You can find out more about the Mentor Support Exchange here.

You will likely have a long and respected career if you follow these preventative measures to avoid complaints and risk. Feel free to e-mail me if you would like to share your thoughts regarding this article. You can find my contact information in NACVA's Online Directory.