Date Posted: November 2015
Q: You have identified 5 key things to consider when hiring a valuation expert / forensic accountant in a divorce. What are they?
PH: When you are considering hiring a business valuator you will want to know five things:
1. the potential valuator’s experience,
2. the type of expert report you need,
3. the process that you may expect,
4. an estimated fee for the work, and
5. an anticipated timeline.
Q: What are some of the ways in which to evaluate a valuator’s experience?
PH: To review a valuator’s experience, you would first ask to see the valuators’ CV or resume. Look at the designations. Is the valuator a Chartered Business Valuator? A Chartered Business Valuator or CBV is an accepted qualification in divorce proceedings. Look for the types of experience noted on their resume.
Is there experience in matrimonial cases? Has the valuator testified in court as an accounting expert? Are there publications / presentations noted on the resume that relate to the industry in question or the type of case that you have? What do you mean when you say that the spouse hiring a valuator should consider the type of expert report required? There are different reports that can be produced, and they are based on the kind or investigation needed. Is a valuation of a business interest required? Is a value of a business required both at the date of marriage and at the separation date? Is an assessment of income for spousal support required? Perhaps a critique of another expert’s report or a forensic investigation report is wanted?
These are some of the types of reports that are prepared by valuators, so it’s important to know what information is needed to know which type of report to request from a valuator. When I speak to a spouse, I inform them that they, along with their legal counsel, need to make those decisions.
Q: I understand that there are different levels of valuation reports as well. What are they?
PH: In addition to having different types of reports, there are three levels of valuation reports, as outlined by the CICBV — Canadian Institute of Chartered Business Valuators. Each have different levels of work completed and associated cost because of the amount of time involved with the investigation and in producing the report.
The lowest level is called a calculation report, which is typically used for settlement purposes or at early stages of litigation, and relies on representations from the company management with limited review and analysis to corroborate those management representations.
The second level is an estimate, whereby the valuator does more investigation into the business than at the first level.
The highest level is a comprehensive valuation report. This is the highest level of assurance and it is used primarily for trial or if requested by a spouse’s counsel.
A detailed review of the business, industry and the economic conditions at the Valuation Date are conducted by the valuator for a comprehensive. The different types of valuation reports are often considered analogous to the three levels of financial statements.
For example, a calculation report could be compared to a Notice to Reader, an estimate to a Review Engagement and a comprehensive could be compared to an audit — notwithstanding that a comprehensive valuation report is not an audit of the businesses financial records.
Q: How does it work? What would be the steps to getting an expert report completed?
PH: When retaining a business valuator, it is important to discuss the process with them. Typically, the valuator will describe the process to include the preparation and signing of an engagement letter to ensure that the mandate is understood and agreed to by all parties. Once retained, the valuator will prepare an information request, conduct interviews (if necessary), review and analyze documents, prepare calculations and the draft report. The valuator may meet with the client to discuss the findings prior to issuing the final report. The process will vary from case to case, but typically those are the steps to a completed report.
Q: Should the client get a fee estimate?
PH: Yes, generally, the valuator should provide the potential client with a fee estimate. An important consideration is that if a client is comparing fees of two or more valuators, he or she should make sure that it is an “apples to apples” comparison. By this I mean, is one valuator quoting a fee to provide a calculation report, but the other will provide an estimate report?
Other questions to ask include:
1. Who will be doing the work?
2. Who will attend the mediation and court?
3. What is and isn’t included with the fee estimate?
Q: What is a typical timeline to complete an expert report?
PH: The typical timeline to complete an expert report will vary. It is an issue that should be discussed up front. Are there specific deadlines that must be met? For example, does the report need to be provided prior to a motion for income support? The valuator will want to know about any information disclosure impediments which may affect timing. The client, his or her counsel and the valuator should all be on the same page about timing.
Q: So… hiring a business valuator takes several things into consideration.
PH: Yes, just to reiterate, five things that a spouse will want to consider are the experience of the valuator, the type of expert report required, the anticipated process to get the report completed, the estimated fees, and the anticipated timeline.