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Ethical Standards—Fourth Quarter 2018

NACVA Association News

How Well Do You Know Our General and Ethical Standards?

Chris Hatcher, CPA, CFF, CGMA, CVA, CFE
NACVA Ethics Oversight Board Member
Baldwin CPAs, PLLC
943 South First Street
Louisville, KY  40203
(502) 657-2633
Standards. By their very nature, standards are open to interpretation by professionals. The Ethics Oversight Board (EOB) of NACVA is charged with the monitoring of its members with regard to ethical and professional standards. The EOB’s responsibilities include educating, monitoring, and enforcing compliance of NACVA’s members. One of the EOB’s duties is creating awareness and understanding of NACVA’s professional standards. This short article will attempt to see how well you know our ethical standards.

NACVA professional standards are broken out into the following categories: General and Ethical Standards, Development Standards, Reporting Standards, Review Engagement Development Standards, and Review Engagement Reporting Standards. Today, we will focus solely on our General and Ethical Standards (GES).

Our first GES sets the tone for all of our other standards: “A member shall remain objective, maintain professional integrity, shall not knowingly misrepresent facts, or subrogate judgement to others. The member must not act in a manner that is misleading or fraudulent.” If we cannot act with integrity and objectivity, we have no business being in this profession. One person abusing this standard can cast a broad shadow over the vast majority of professionals who do adhere to our standards.

The second GES deals with Professional Competence. We must make sure we are only accepting engagements that we are confident we can complete with a high degree of competence. If we do not feel completely sure, either get the necessary expertise through research, education, or consultation before taking on such an engagement.

The third GES dealing with Due Professional Care follows right along with the second. An example of due professional care would be the application of the care and skill expected of a reasonably prudent and competent valuation professional. There is no way we could possibly perform an engagement with due professional care if we do not have the professional competence needed to begin with.

Our forth GES is one that is often overlooked: Understanding and Communications with Clients. It is very easy to get rolling on a new engagement and not establish a clear understanding with the client of the nature, scope, and limitations of the services we will be performing. This understanding needs to be established before we begin working, and we need to make sure that we communicate any scope changes or issues that we encounter during the engagement on a timely basis. These communications help ensure that both parties are on the same page and can be invaluable if for some reason there are disagreements between you and your client.

The fifth and sixth GES require that we properly plan and supervise the engagement and obtain sufficient relevant data to back up our conclusions. The tenth GES flows seamlessly behind these two in that we should always have the relevant data properly documented. We also should make sure that we properly document matters where we significantly use our professional judgement.

The seventh GES requires us to maintain our client’s information in a confidential manner. Unless the client gives us express permission or we are compelled by a legal authority, no client information should ever be disclosed to a third party. Our clients trust us with their most secure financial information and we need to treat it as we would our own. The ninth GES goes right along with this by stating that in all matters, we should be acting with our client’s interest in mind, all while maintaining integrity and objectivity.

The eighth GES is fairly straight forward: do not do anything that will discredit the profession. I believe that this applies to our role as CVAs as well as outside of this role. Committing a felony, lying under oath, and using client’s information for our personal enrichment are just a few examples of acts that could discredit the profession.

The eleventh and final GES simply reminds us that we have to let the users of our reports know whether or not we have a financial interest in the subject company. There is no reason to not disclose this as we should be “above board” in all of our dealings with clients and potential users of our reports.

The goal of this short article was not to simply restate our general and ethical standards, but to remind you of the importance of these standards in keeping our organization one of the most respected around. We should all strive daily to make the CVA credential well respected and seen as the Gold Standard of business valuation credentials.