Mitigating Professional Liability Risk Upon Deriving Fair Market Value in

MITIGATING PROFESSIONAL LIABILITY RISK UPON DERIVING FAIR MARKET VALUE IN BUSINESS VALUATION

 Project Leader

Assoc.  Prof. Dr.  Rohaya Binti Abdul Jalil (UTM)

Project Members

Prof.  Dr Hishamuddin Bin Mohd Ali (UTM)

Dr.  Kamalhassan Ail Achu (UTM)

Dr Muhammad  Najib Bin Mohamed  Razali (UTM)

En Zulkifli  Esha (UM)

ABSTRACT

The demand for business valuation due to financial market uncertainties, financial and business  challenges  have  driven  professions  such  as  accountants,  valuers  and lawyers  into  the  field  of service  business  valuations.  However,  in  Malaysia  every profession offers their own services for certain procedures, according to their practice and suitability. As a result, offering a business valuation service is considered risky and many of the professionals, especially qualified and skilled valuers offering this service, refuse to continue with this practice. Therefore,  initiatives are needed to establish the risk of professional liability when acquiring fair market value (FMV) in offering business valuation services. The demand for business valuation services is increasing and these professional services are offered by experts from valuation or accounting backgrounds or combination expertise of these professions. Certainly, these professionals need to provide accurate business valuation  services that benefit the client and fair value to third parties using their disclosure. Business valuations for listed companies are more transparent because the value of the company can be determined with real financial market information and the FMV method is commonly used.  However,  in the case of a takeover  on  unlisted  or  private  companies,  the  information  is  difficult  to  obtain. Therefore,  in  determining  FMV,  the business valuation  process should ensure that appropriate methods are implemented. Therefore, this research aims to highlight these issues  by  using research tools  to quantify  all  the  risk  involved  in  determining  the business valuation.  This research also attempts to make risk  in  business valuation more objective and able to be used as a guideline for practitioners  in  this field.  The need to emphasise risk is very significant, due challenging competition of the business world and the latest economic obstacles witnessed by the growing number of mergers, acquisitions, and hostile takeovers for monopoly domination of market and business survival. Consequently, the demand for business valuation services is increasing and these professional services are offered by experts from valuation or accounting backgrounds or a combination  of these  professions.  Certainly,  these  professionals need to provide accurate business valuation services that benefit the client and fair value to third parties using their disclosure.  Business valuations for listed companies are more transparent because the value of the company can be determined with real financial market information and the FMV method is commonly used. However, in the case of a takeover on unlisted or private companies, the information is difficult to obtain. Therefore,  in  determining  FMV,  the business valuation  process should ensure that appropriate methods are implemented. Moreover, the definition of FMV is very subjective.