The Canadian Public Accountability Board (CPAB), in collaboration with the Chartered Business Valuators Institute (CBV Institute), has published a practical guide on how valuation experts, auditors and management should interact when valuations are prepared and audited for financial reporting. The publication aims to clarify role boundaries, highlight good practices observed through CPAB inspections, and illustrate common valuation issues using scenarios linked to Canadian Auditing Standards (CAS) and CBV Institute Practice Standards. The guide distinguishes between a valuation expert engaged by management and an auditor’s expert engaged to support the audit, noting that the same valuator cannot serve both roles and that auditors must treat management’s external valuation expert as an extension of management. It also sets expectations on the scope and form of valuation reporting, describing Calculation, Estimate and Comprehensive valuation reports and recommending that, for financial reporting purposes, a report be at least Estimate-level because a Calculation report will generally not provide sufficient audit evidence where there is a significant risk of material misstatement. Observed good practices include clear documentation and delineation of responsibilities under CAS 620, timely sharing of relevant information, explicit assessment of estimation uncertainty and potential management bias, and close coordination between audit teams and valuation experts so that interrelated inputs, such as cash flows and discount rates, are evaluated together. Illustrative scenarios cover handling contradictory external information versus management forecasts, considering events up to the audit report date (including whether to expand the valuation expert’s mandate beyond the valuation date), avoiding overly narrow expert scopes such as assessing only a discount rate, and managing independence risks where management adjusts estimates based on the auditor’s expert’s point estimate or range.
Canadian Public Accountability Board 2025-07-23
Canadian Public Accountability Board and CBV Institute publish joint guidance clarifying the use of valuation experts in financial reporting
The Canadian Public Accountability Board and the Chartered Business Valuators Institute released a guide clarifying interactions among valuation experts, auditors, and management in financial reporting. It emphasizes role boundaries, good practices, and common valuation issues, recommending at least Estimate-level reports for significant risk cases. The guide also addresses scenarios like handling contradictory information and managing independence risks.