August 30, 2022

Document and Information Requests: A Burden or a Useful Tool?

By Marissa Pepe Turrell, ASA, CVA, Director, Advisory Services & Scott Loesch, Manager, Advisory Services

Document and Information Requests: A Burden or a Useful Tool? Investigations, Forensic Accounting & Integrity Services

If valuation has ever factored into one of your engagements — such as a transaction, a gift of an interest in a private company, or a dispute involving a company’s value — then you are likely familiar with the typically long list of documents the retained appraiser requests. While these requests can appear overly burdensome, exhaustive and invasive (particularly to owners of private companies who are protective of business records), these documents serve an important purpose.

A well-thought-out request and a substantive reply increase efficiency and eliminate the need for time-consuming and expensive follow-up or additional requests. Many factors can influence the volume of documents and information requested, including:

  • The scope of the engagement, including the number of entities subject to valuation; depth of the valuation and/or forensic analysis; and the number of valuation dates (i.e., date of marriage, date of commencement, date of trial, etc.).
  • Which party retained the financial expert.
  • The complexity of the matter.

Generally, intricate issues that involve multiple valuations and forensic examinations (i.e., identification of the character of property, identification of hidden assets, lifestyle analyses, income analyses, maintenance analyses, etc.) will result in more documents and information requested. However, greater volume need not result in chaos. A request for documents and information can quickly become a useful tool if all parties involved can easily identify what was requested, what was provided, and what remains outstanding.

What about privacy concerns? Business owners have legitimate reasons for keeping company information confidential. For example, if a competitor learns about pricing, profit margins, intellectual property, or plans for new products, it could be devasting to a company. Nevertheless, this information is important to share with appraisers in the context of a valuation. Accounting firms are subject to privacy restrictions under AICPA confidentiality rules, and engagement letters typically reiterate these restrictions. In some cases, nondisclosure or confidentiality agreements provide the requisite language to alleviate such concerns.

Often the longest part of a valuation engagement is the discovery process. The party responding to the request for documents and information should provide a response to each request, even if an item does not exist. Responding to every item eliminates the need for duplicative follow-up requests for nonexistent documents and information. Further, while a request for documents and information may cause stress, fear, anger, and/or other emotions, the document discovery process must not be needlessly disrupted or prolonged.

Counsel, parties, and financial experts should do their best to efficiently produce relevant documents and information. Doing so can be a useful tool for all parties involved. It can also create transparency, reduce fees, and ensure the matter is resolved efficiently.