Trust and Integrity: Your Ethics is One Call Away!—Second Quarter 2025

Trust and Integrity: Your Ethics is One Call Away!

Nick Mears, CVA, MAFF, MBA
NACVA Ethics Oversight Board Member

Business valuations are vital in facilitating mergers, acquisitions, and dispute resolutions. However, valuations, even for nonlitigation purposes, pose significant risks to the appraiser without proper objectivity and adherence to professional standards. This article explores how any valuation could be reviewed outside its intended purpose, exposing the appraiser's integrity, objectivity, and compliance with professional standards.

The Case for Professional Integrity
In a past engagement, an attorney asked me to provide a business valuation for a dispute. I learned that a third-party appraiser recently performed a valuation for internal transaction purposes. My analysis revealed a significantly lower value than the previous appraisal, prompting a closer examination of the third-party valuation. Several technical errors accounted for some discrepancies. However, the most alarming discovery came during discussions with the prior appraiser, who admitted the valuation was intentionally inflated to align with the client's objectives. The third-party appraiser quickly realized that their valuation may be a focal point during the trial, highlighting the technical deficiencies and the appraiser’s integrity and objectivity.  

An appraiser’s reputation is one of the most critical factors that will provide him or her with a long and successful career. Following professional and ethical standards is not just required by the appraiser, it is necessary for career survival. When valuation bias becomes apparent, it tarnishes the reputation of the appraiser. The NACVA Professional Standards, particularly Section II.A, emphasize that members must "remain objective, maintain professional integrity, shall not knowingly misrepresent facts, or subrogate judgment to others." An appraiser following this standard safeguards them against the reputational and legal risks of biased valuations.

I also believe that we owe our industry a duty of trust. If valuation practitioners lose public trust, we invite outside sources (i.e., Internal Revenue Service, Department of Labor, Securities and Exchange Commission, etc.) to set new rules or standards for us. If you do not believe me, ask a valuation practitioner who has been performing valuations for the last 30 years.

Standards and Ethics Q&A Hotline
The Standards and Ethics Q&A Hotline Team is a vital resource, offering confidential guidance to help practitioners address concerns. If you believe a NACVA CVA credential holder did not follow the professional standards and the valuation is not in pending litigation, then I recommend you utilize this resource. This proactive approach can save time and provide clarity, ensuring practitioners effectively and efficiently address ethical dilemmas. Generally, this resource provides faster initial guidance than filing a Certificant Complaint with the NACVA.[1] While not a focal point of this article, the steps to file a complaint against a CVA are included in the illustration.

The Standards and Ethics Q&A Hotline Team is comprised of highly experienced and credentialed members of NACVA—Moderators, who are either currently serving, or have served in the past, on NACVA’s Standards Board (SDB) and/or Ethics Oversight Board (EOB).[2] To submit a request for review, simply fill out the Standards and Ethics Question Submittal Form, which is directed to a Standards and Ethics Q&A Hotline Moderator.[3]

For the previous example, the Standards and Ethics Q&A Hotline could not be used since the litigation was pending. However, this resource could be used once the litigation has been resolved. Furthermore, a Certificant Complaint could be completed to investigate this matter further.

The Takeaway
Business valuation is a profession rooted in trust. Any deviation from integrity or objectivity jeopardizes the valuation's credibility and tarnishes the appraiser's reputation. Resources like the Q&A Hotline play a pivotal role in ensuring practitioners address potential biases proactively, fostering both transparency and trust within the profession.