Professional and Ethical Considerations
Ethics questions test judgment under pressure. The core obligations: competence (only accept work you can perform with skill), independence and objectivity (avoid conflicts; disclose relationships that could impair objectivity), confidentiality (protect client information except where law or standards require disclosure), due professional care, and integrity (no misleading conclusions).
Contingent fees are a persistent trap: fees contingent on a predetermined value or on the outcome of a transaction create a self-interest threat and are generally prohibited or severely restricted under professional standards. Similarly, accepting an engagement where the client dictates the conclusion is improper-the appraiser must be free to reach an independent conclusion even if it disappoints the client.
Conflict-of-interest scenarios-valuing a business in which the appraiser holds shares, or serving both sides of a dispute-require disclosure and often withdrawal. Advocacy roles (e.g., acting as an expert witness versus an advocate) demand clarity: an expert provides objective opinion; an advocate argues a position. Blurring the two undermines credibility.
Documentation is an ethical as well as technical duty: workpapers should support the report and be retained per applicable standards. When facts are insufficient, the appraiser should qualify the opinion, obtain more information, or decline the engagement rather than guess silently.
Worked scenario: a client offers a bonus if the appraised value exceeds a target price. The correct response is to decline the contingent arrangement, explain the independence threat, and offer a fixed or hourly fee instead-then document the discussion.