Impact of professional competency of valuers on accuracy of Fair Value for financial reporting

Abstract

This study examined the impact of the competency of valuers (CV) on the accuracy of Fair Value (FV) assessment for Property, Plant and Equipment (PPE) for financial reporting. The objective of the study is to address gaps in the body of previous research by exploring the relationship between CV (independent variable) and accuracy of FV (dependent variable), with an emphasis on experience and qualification. It used a mixed method approach, combining a literature review and a survey of 50 chartered valuers and accountants followed by a quantitative analysis by SPSS, employing Pearson correlation test and Regression analysis. The correlation test found a moderate positive correlation (r=0.422) between CV and the accuracy of FV and revealed the relationship is significant with p-value of 0.002. The regression analysis also revealed that CV explained 17.8% (R square 0.178) variance in accuracy of FV while a one unit increase in CV is associated with a 44.2 increase in accuracy of FV. The significance of qualification and  experience for increasing FV accuracy was reaffirmed by the qualitative analysis and it concludes that CV is a significant factor so greater competency in valuers leads to higher accuracy of FV assessment. Accordingly, it recommends enforcing qualifications and experience requirements in FV assessment, strengthening Continues Professional Development, more investment in valuer education and training, putting quality assurance mechanism in place, and ensuring valuers to act ethically in FV assessment for financial reporting.