Every valuation season, the same categories of auditor query resurface — and nearly all of them stem from valuation reports that reach a conclusion without adequately showing the reasoning behind it.
The most common queries
- "What basis of value was applied, and why?" Reports that state a conclusion without explicitly naming and justifying the basis of value invite immediate follow-up.
- "What comparable evidence supports this conclusion?" A stated yield or rate without the underlying evidence set is one of the most common query triggers.
- "Why did the methodology change from last year?" Inconsistent methodology year-over-year, without explanation, raises questions about either year's approach.
- "How were unobservable inputs determined?" For Level 3 fair value work, auditors expect a documented rationale for every unobservable input.
- "Is the valuer independent, and appropriately qualified?" Auditors increasingly verify this as a precondition to relying on the report at all.
- "Does the valuation date align with the reporting date?" A valuation dated meaningfully earlier than the reporting date, without adjustment, is a frequent point of challenge.
How a well-prepared report preempts these
The reports that generate the fewest audit queries share common traits: explicit basis of value statement, disclosed comparable evidence or cost build-up, clearly stated methodology with justification for any changes, explicit valuer independence and credentials, and a valuation date that either matches the reporting date or is explicitly reconciled to it.
The cost of getting this wrong
Beyond the immediate friction of query-and-response cycles, unresolved audit queries on valuation can delay financial statement sign-off, and in more serious cases, lead to qualified audit opinions or restated fair value figures — the cost of a more thoroughly documented report upfront is almost always lower than the cost of remediation after an audit query.