Reflecting on rule 201.

The AICPA's new Statement on Standards for Valuation Services No. 1 gives us all reason to reflect on Rule 201--General Standards of the Code of Professional Conduct.

These standards call for the CPA to comply with standards of professional competence, due profession care, planning and supervision, and sufficient relevant data.

Before accepting an engagement, the CPA or firm must ascertain whether they can perform the service with professional competence. This is especially critical with business valuation services. Simply being a CPA does not qualify one to perform valuation services. But being a CPA means the professional has the fundamental skills to assist them as they gain the knowledge and experience to perform competent valuations.

To perform business valuation services, a CPA should be trained in valuation theories, methodologies, and procedures. In valuation assignments, as in all types of engagements, CPAs must exercise due professional care in their performance of services.

The practitioner planning and supervising the work of others in a valuation engagement must keep in mind that these assignments require professional judgment throughout the process of estimating value. Thus, proper supervision demands sufficient communication with staff to successfully provide the professional judgment necessary for the valuation.

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Obtaining sufficient relevant data is an important part of the valuation process and the new Standard will assist valuation practitioners in determining what documentation is relevant and sufficient. As we become more familiar with the new standard, we must not lose sight of the basic general standards that govern our practices.

--Scott T. Dye, CPA, ABV, CVA is CalCPA Litigation Sections' Business Valuation Section secretary and a shareholder with Stoughton Davidson Accountancy Corporation in Fresno.