It is important to find the right expert witness in cases that require a business valuation. You want to make sure that you retain a valuation expert who has experience that is relevant to the particulars of your case. If, for example, you are hiring a business valuation expert for a case involving patents, you want to be certain that the expert has a thorough knowledge of patent issues on the particular product or process and any relevant local laws pertaining to intellectual property and the standards of the specific industry involved.
When vetting a business valuation expert, attorneys need to carefully examine their credentials. Some questions to ask are:
- How many times has the expert testified before?
- How many valuation reports has the expert completed?
- Does the expert have knowledge about the specific business in need of valuation?
- If the valuation report is for a divorce case, does the expert have experience with family law?
- How many times has the lawyer submitted a written report?
There are several nationally recognized organizations for valuation experts. These organizations usually require experts to submit samples of their valuation work and take an exam in order to get accredited. Attorneys should be aware of these organizations when seeking to retain a forensic accountant. They include the American Institute for Certified Public Accountants (AICPA), the American Society of Appraisers (ASA), the Institute for Business Appraisers and the National Association of Certified Valuation Analysts (NACVA).
Certified public accountants (CPAs) can often provide respectable business valuation reports. When searching for a CPA, it’s imperative that they have been certified as an accredited business valuator (ABV). For a CPA to receive an ABV license they must have completed 10 business valuation engagements and passed a test. ABV certification also requires 60 hours of related continuing education.
Unlike the AICPA, the American Society of Appraisers does not require members to be CPAs. However, ASA certification requires a college degree, a daylong examination and a separate ethics examination (ASA is the only valuation organization with a separate exam for ethics). Members also need to have two years of full-time work experience. Senior members are required to have a minimum of three years of experience.
The IBA does not require work experience for accreditation, nor are members required to be CPAs. However, they grant different certification types based on experience. For example, Master Certified Business Appraisers (MCBAs) are required to have 10 years of experience.
NACVA has two levels of certification: Accredited Valuation Analyst (AVA) and Certified Valuation Analyst (CVA). AVAs have to successfully complete a 30 to 50 hour take-home exam. CVA certification requires the valuator to be a CPA and complete a half-day proctored examination.
These organizations do their best to standardize valuation practice. However, there are still going to be great experiential differences between two individual valuation experts. That’s why it is important to properly vet your forensic accountant or team up with a referral service that helps you find the right valuation expert for your needs.
By: Mercy Tolentino Steenwyk
Mercy Tolentino Steenwyk is the President and CEO of ForensisGroup, a consulting expert and expert witness referral company. Ms. Steenwyk founded ForensisGroup in 1991, and a recipient of different awards in business, non-profit, including for the firm as one of the largest 100 woman-owned and minority-owned businesses in Lost Angeles for 2011 and 2012. Mercy has over 30 years of experience in strategic planning, operations, management & marketing. She received her B.A. from the University of the Philippines and a Professional Designation from UCLA Ext. including numerous graduate studies in diverse topics in business, law and industrial engineering and others. Mercy currently resides in California. In her spare time, she enjoys reading, traveling, painting, poetry, flower arrangement, cooking and giving back.