3rd party specialist valuations 2062

  • What types of controls, if any, need to be documented around the use of 3rd party specialist for valuation analysis of areas like insurance reserves and impairment testing?

  • You need to look at the frequency of the valuation and the competency iof the valuer.
    If the 3rd party sepcialist is deemed more reliable than someone internally, there valuations may be relied upon. There should be no further issues attached to the transaction other than recognising their fees etc properly in your accounts.

  • You will also need to consider the methodology they apply. Amongst my reviews of valuers I found some had very prescriptive methods that meant that although they were fully qualified and independent they still were no better than using a calculator. For example we gave them the details of what required valuing, they then put the different factors into their industry model and came out with an answer - so if our data was wrong we could have materially wrong valuations.
    Therefore we had to look at completeness and accuracy controls around the information before we gave it to them and then after the valuation to make sure no errors had occured eg a rec. We also included regular minuted meetings with them to satisfy ourselves (and our auditors) that the results were reasonable, they were applying reasonable assumptions, etc.

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