Professional Standards, Ethics, and Legal/Regulatory Framework
This domain tests whether you can frame an engagement correctly, fix the basis of value, disclose conflicts, and keep the work product defensible against a regulator, a court, or an auditor. Questions cluster around "which standard applies, and what must be disclosed," plus boundary disputes such as fixtures versus chattels.
Standards architecture
- IVS is the international default: general standards (scope of work, bases of value, approaches and methods, inputs, reporting) plus asset standards, notably IVS 300 Plant and Equipment and IVS 400 Real Property Interests.
- USPAP governs US federally related work. Its Ethics, Competency, Scope of Work and Record Keeping rules apply regardless of asset class; the work file is retained five years after the report date, or two years after final disposition of litigation in which testimony was given.
- The RICS Red Book applies to RICS members globally and requires professional scepticism plus a signed compliance statement.
Ethics and legal interfaces
- Independence: disclose fee arrangements contingent on a value conclusion, prior involvement with the asset, and any instruction that restricts inspection or enquiry.
- Confidentiality yields to legal compulsion and to the duty to document the file.
- Fixtures: the common-law test has two limbs, degree of annexation and object of annexation. Plant bolted to a foundation can remain personal property where the purpose of attachment was better use of the chattel.
Worked example
A lender instructs you to value a canning line for secured lending. The borrower separately asks for an insurance reinstatement figure, and the loan officer asks you to report "forced sale value to keep the LVR under 60%." Reasoning: two purposes and two bases mean two clearly delineated sections or two engagements. Forced sale is not a recognised basis under IVS; report market value, and if a restricted-realisation figure is needed, define it explicitly with a stated shortened marketing period and disclose it as an assumption. Decline the LVR instruction outright, because targeting a lending outcome converts the opinion into advocacy.
Traps
- Treating "fair value" as one universal definition; it is statute- and standard-specific.
- Citing a standard without stating the edition in force at the valuation date.
- Presenting a restricted-marketing number as a separate basis rather than an assumption applied to a recognised basis.
- Omitting the distinction between the date of valuation and the date of the report.