Auditor's roles and responsibilities in a valuation report

Nowadays, it is more common for a professional valuer to be involved in an audit assignment which involved the fair value estimation over certain assets e.g. intangible assets and financial instruments like share options. Professional valuer is engaged as to estimate the fair value of these assets. The underlying assumptions and the results (fair value) are documented in the valuation report. Normally, the fair value forms a component in the audit client's financial statements. As auditors have to express opinion on the true and fair presentation of the financial statements, they have to review the valuation report as part of their audit works.

Certain roles and responsibilities of an auditor in reviewing a valuation report are as follows:

a. to determine whether the valuation methodology is appropriate;

b. to determine whether the assumptions used and the forecasts are reasonable and realistic;

c. to check accuracy of the calculation involved;

d. to understand the valuer's qualifications and experience on similar valuation; and

e. to verify the source of the supporting data used.

It is no way for an auditor to release their professional liability by just relies on the valuation performed by professional valuer with no further work performed. That is, higher expectation is requested from auditors.

Reference: HKSA 620 (Clarified) - Using the Work of an Auditor's Expert (Issued July 2009, revised July 2010)