Using a Valuation Expert for Audit Purposes
Auditors relying on valuation evidence face increasing regulatory scrutiny, as a result the use of a valuation expert for audit purposes is increasingly important.
Under the Australian Auditing Standards, particularly ASA 500 – Audit Evidence and ASA 620 – Using the Work of an Auditor’s Expert, auditors must obtain sufficient and appropriate evidence and evaluate whether the work of a valuation expert is adequate for audit purposes.
Valuers, by contrast, apply the International Valuation Standards (IVS) to form and express market‑based professional judgement.
The critical—and often overlooked—point is this: IVS already responds to many of the specific issues auditors are required to address under the Auditing Standards.
This article provides a practical mapping between common audit requirements and the IVS standards that support auditors when appointing and relying on a valuation expert.
1. Competence, Capability and Objectivity of the Valuation Expert
Per ASA 620 and ASA 620, auditors must evaluate whether a valuation expert has:
- appropriate competence and capabilities, and
- the necessary objectivity.
In response, the IVS 100 Valuation Framework requires valuers to:
- demonstrate professional competence,
- act objectively and without bias,
- apply professional scepticism, and
- comply with ethical requirements.
IVS does not treat competence and objectivity as assumptions. They are requirements that must be demonstrated and supported. Where valuers fail to clearly document:
- relevant expertise,
- professional judgement applied, or
- safeguards against bias,
auditors are forced to infer objectivity and competence—often conservatively—creating friction and additional audit work.
2. Nature, Scope and Objectives of the Valuation
Per ASA 620 and ASA 500, auditors must clearly understand:
- what work was performed,
- for what purpose, and
- with what limitations.
in response, IVS 101 Scope of Work requires explicit disclosure of:
- the asset or interest being valued,
- the basis and premise of value,
- intended users and intended use,
- assumptions, limitations and restrictions.
IVS 101 directly supports the auditor’s assessment of relevance and reliability. Where the scope of a valuation is unclear, restricted, or misaligned with the audit objective, auditors cannot conclude that the valuation constitutes appropriate audit evidence under ASA 500.
3. Alignment with the Financial Reporting Framework
Per ASA 500, ASA 540, auditors must evaluate whether a valuation is prepared consistently with the applicable accounting framework, such as fair value under AASB / IFRS.
In response, IVS 102 – Bases of Value, requires valuers to:
- explicitly identify the basis of value,
- identify the premise of value (including highest and best use where relevant), and
- explain why that basis and premise are appropriate for the intended use.
Problems arise when:
- “market value” and “fair value” are used interchangeably without explanation, or
- key premises (including highest and best use) are implicit rather than articulated.
From an audit perspective, an unexplained basis of value creates irrelevant evidence, regardless of the robustness of the underlying calculations.
4. Method Selection and Application
Per ASA 500 and ASA 620, auditors must assess whether valuation methods are appropriate for:
- the asset being valued, and
- the circumstances of the engagement.
In response, IVS 103 – Valuation Approaches:
- defines the income, market and cost approaches,
- explains when each approach is appropriate, and
- emphasises that method selection requires professional judgement—not formulaic application.
IVS does not allow method selection to be arbitrary. Where a single method is used (or others dismissed), the rationale must be documented. Auditors commonly struggle where alternative approaches are not considered or are excluded without explanation.
5. Data, Inputs and Assumptions
Per ASA 500 and ASA 540, auditors must obtain sufficient and appropriate evidence that valuation inputs and assumptions are reasonable.
In response, IVS 104 – Data and Inputs requires that:
- data and inputs are relevant, accurate, complete and timely,
- significant assumptions are documented and justified, and
- internal consistency exists within the valuation model.
Typical audit concerns addressed by IVS:
- discount rates assessed in isolation from cash flows,
- comparables used without adequate adjustment,
- assumptions not supported by observable market evidence.
IVS requires inputs to be assessed in context, aligning closely with audit expectations under ASA 500—though this alignment is often left implicit.
6. Adequacy, Transparency and Auditability of the Valuation
Per ASA 620, auditors must evaluate whether the valuation expert’s work is adequate for audit purposes.
In response, IVS 106 – Documentation and Reporting mandates reporting that allows another professional to:
- understand the valuation logic,
- follow the judgement applied, and
- identify methods, assumptions, inputs and limitations.
A valuation may be technically compliant, but if key judgements exist only in the valuer’s head, it is not usable as audit evidence.
7. Completeness and Asset Identification
Per ASA 500, auditors must consider whether valuation evidence is complete.
In response, IVS 101, IVS 200, IVS 210 and IVS 400 require valuers to consider:
- what assets or interests contribute to value,
- whether multiple intangible assets exist, and
- whether real property interests and rights are properly identified.
IVS 210 explicitly recognises that value may reside in multiple identifiable intangible assets—not merely residual goodwill—an area where completeness issues frequently arise in audits.
Summary: Using a Valuation Expert for Audit Purposes
The tension between auditors and valuers is rarely caused by incompatible standards. More often, it arises from implicit application. When International Valuation Standards are applied explicitly—particularly in relation to:
- scope of work,
- basis and premise of value,
- coherence of inputs,
- documentation and reporting,
they directly support the conclusions auditors are required to reach under ASA 500 and ASA 620.
For auditors appointing a valuation expert, the question is not whether IVS applies—but how clearly it is applied and articulated.
See more about Lotus Amity valuation reports for financial reporting, and compliance with AASB 2, AASB 3 and AASB 138.
