Valuation Service

The Code only says “might” (i.e. may) create an advocacy threat – it will depend on the specifics of the valuation.

Look at the definition of advocacy threat – the threat that a professional accountant will
promote a client’s or employing organization’s position to the point that the accountant’s objectivity is compromised.

So if the auditor were to value an audit client’s property and that property (or the business) were to be sold objectivity might appear to be compromised to overstate the value of the asset. Or suppose an asset is to be valued for the bank/finance provider as security – if the asset isn’t included in the financial statements at revalued amount there is no self-review threat – but that doesn’t mean no threat.

This aspect of advocacy threat can be linked to the prohibition on assuming management responsibilities – “Assuming a management responsibility … might ???create an advocacy threat because the firm or network firm becomes too closely aligned with the views and interests of management.” Since management’s responsibility include “making decisions regarding the acquisition, deployment and control of human, financial, technological, physical and intangible resources”, responsibility for managing finance (including how it is secured) is management’s.

The main thing that has become outdated is what constitutes a safeguard – threats are still threats. So any service in addition to audit always has some element of self-interest threat because there will be a fee.