The FRC have highlighted inadequate procedures around the auditing of valuations in the latest reprimand against the profession. Clearly in this case, overdue reliance was placed on the independent specialist without involving sufficient valuation expertise from within their organisation to challenge the results.
Independent valuers are used to supporting their analysis both with clients and with auditors and are typically well prepared to respond to queries and robust challenges.
It is not clear in this case whether the valuations are of real assets, investments or for intangibles, which generally are harder to value given their bespoke nature, however the auditing process was flawed according to the FRC.
The case is likely to refocus the efforts of auditors to ensure externally prepared work is firstly obtained and then subsequently reviewed by their specialist teams. Given the subjective nature of valuations, it is always likely to be an area of focus for the FRC, as it is a higher risk area for the audit.
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