An appraiser discovers a significant error in a completed appraisal report that has already been delivered to the client. According to USPAP, the appraiser must:
Correct Answer
B) Immediately notify the client and provide a corrected report
USPAP requires appraisers to immediately notify clients of significant errors and provide corrected reports. This is part of the Ethics Rule regarding integrity and the duty to correct misleading information.
Why This Is the Correct Answer
Option B is correct because USPAP's Ethics Rule specifically requires appraisers to act with integrity and avoid misleading communications. When a significant error is discovered in a delivered report, the appraiser has an immediate duty to notify the client and provide corrected information. This obligation stems from the fundamental principle that appraisers must not knowingly permit misleading information to remain uncorrected when they become aware of it. The requirement is proactive and immediate, not contingent on client requests or discovery.
Why the Other Options Are Wrong
Option A: Wait to see if the client notices the error
Option A violates USPAP's Ethics Rule because it represents a passive approach that could allow misleading information to influence the client's decisions. Waiting for the client to notice the error fails to meet the appraiser's affirmative duty to correct known significant errors and contradicts the integrity requirement.
Option C: File a supplemental report only if requested
Option C is incorrect because it makes the correction contingent on a client request, which violates the appraiser's proactive duty under USPAP. The Ethics Rule requires immediate action when significant errors are discovered, not a reactive approach that waits for client initiative.
Option D: Document the error in the workfile but take no other action
Option D fails to meet USPAP requirements because merely documenting the error in the workfile without correcting the delivered report allows misleading information to remain with the client. This passive approach violates the Ethics Rule's requirement to avoid misleading communications and take corrective action.
ERROR = Immediate Action
E.R.R.O.R. = Ethics Requires Rapid Obligation Response. When you discover a significant error, think 'ERROR' and remember that ethics demands immediate response, not waiting or passive documentation.
How to use: When you see questions about discovered errors in delivered reports, immediately think 'ERROR = immediate action required' and look for the answer choice that involves prompt client notification and correction, not passive or delayed responses.
Exam Tip
On exam day, remember that USPAP almost always requires proactive, immediate action when ethical issues arise. Eliminate any answer choices that suggest waiting, being passive, or making corrections contingent on client requests.
Common Mistakes to Avoid
- -Thinking the appraiser can wait to see if the error matters to the client
- -Believing that documenting the error in files is sufficient without client notification
- -Assuming correction is only required if the client specifically requests it
Concept Deep Dive
Analysis
This question tests understanding of USPAP's Ethics Rule requirements regarding the correction of significant errors in completed appraisal reports. The Ethics Rule emphasizes integrity, impartiality, and objectivity, which includes a duty to correct misleading information that could affect the client's decision-making. When an appraiser discovers a significant error after report delivery, they have an affirmative obligation to take corrective action rather than remaining passive. This requirement protects both the client's interests and maintains the integrity of the appraisal profession by ensuring accurate information is provided for important financial decisions.
Background Knowledge
USPAP's Ethics Rule establishes fundamental obligations for appraisers including integrity, impartiality, and objectivity in all professional activities. The rule specifically prohibits misleading communications and requires appraisers to take corrective action when they become aware of errors that could affect client decisions.
Real-World Application
In practice, this might occur when an appraiser realizes they used incorrect comparable sales data or made a calculation error that significantly affects the final value conclusion. The appraiser must immediately contact the client, explain the error, and provide a corrected report to ensure the client has accurate information for their lending or investment decisions.
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