An appraiser discovers an arithmetic error after delivering a report. What is required?
Correct Answer
A) Correct it and notify the client and intended users
Why this is correct: USPAP's Ethics Rule and Standards Rule 2-3 require an appraiser to promptly correct a significant error in a delivered report and notify the client and any intended users who received the report. This prevents reliance on misleading information. Why the other choices are wrong: The choice to wait until the client raises the matter first is incorrect; the appraiser has an affirmative duty to correct errors. The choice to note the error in the workfile and take no action is wrong; the error in the report itself must be addressed. The choice to issue a new report with a later effective date is false; this would misrepresent when the valuation opinion applies. Exam tip: Upon discovering an error, the required action is: correct, notify, and maintain the original effective date.
Why This Is the Correct Answer
An arithmetic error that changes the value conclusion makes the delivered report misleading, and the appraiser who discovers it owns the duty to cure it. Correcting the report restores a supportable conclusion, and notifying the client and intended users is what actually stops the reliance the error created. This is an affirmative duty triggered by the appraiser's own knowledge, not by anyone's complaint. Choice A is the only option that both fixes the analysis and reaches the people who hold the flawed report.
Why the Other Options Are Wrong
Option B: Wait until the client raises the matter first
Waiting converts an honest mistake into a knowing one. The duty to avoid misleading communication runs from the moment the appraiser learns of the error, and it does not depend on whether the client is sophisticated enough to catch it. In practice the client may never notice, which is exactly why the obligation cannot be made contingent on a complaint.
Option C: Note the error in the workfile and take no action
A workfile note satisfies record keeping and nothing else. The misleading document is the report sitting in the client's file and in the hands of intended users, and no entry in the appraiser's own records reaches them. Documenting an error you have decided not to disclose also creates a written record of the decision not to act.
Option D: Issue a new report with a later effective date
Changing the effective date misrepresents the point in time to which the opinion applies and manufactures a second problem on top of the first. The error was in the appraiser's arithmetic, not in the market, so the corrected conclusion still speaks as of the original effective date. Only the date of the report changes when a correction is issued.
Fix It, Tell Them, Freeze the Date
Three moves in order when an error surfaces after delivery. Fix the analysis, tell the client and every intended user who got the report, and freeze the effective date where it was. Only the report date moves.
How to use: Score each option against the three moves. Anything that omits notification, waits for the client, or shifts the effective date fails, which usually leaves exactly one choice standing.
Exam Tip
On post-delivery error questions, eliminate every passive option first. Any answer whose verb is wait, note, monitor, or document is wrong when a delivered report is misleading.
Common Mistakes to Avoid
- -Assuming the duty to correct is triggered only by a client inquiry or a review comment
- -Treating a workfile entry as a substitute for notifying intended users
- -Advancing the effective date on a corrected report instead of only the report date
Concept Deep Dive
Analysis
The Ethics Rule prohibits communicating assignment results in a misleading manner, and that obligation does not end the moment the report is transmitted. Once an appraiser knows that a delivered report contains an error material enough to affect the conclusion, every day the client and intended users continue to rely on it extends the misleading communication. The compliant response has three parts: correct the analysis, communicate the corrected result to the client and to intended users who received the original, and leave the effective date where it was, since the error was in the arithmetic and not in the market as of the valuation date. The workfile then documents both the original report and the correction, but documentation is a record keeping duty and cannot substitute for telling the people who are relying on the number.
Background Knowledge
You need the Ethics Rule's conduct obligations, including the prohibition on communicating a report in a misleading manner and the duty to act when the appraiser learns a delivered report is wrong. You should also know the difference between the effective date of the opinion and the date of the report, and understand that the workfile requirement is separate from the duty to communicate with intended users.
Real-World Application
An appraiser finds a transposed square footage figure two weeks after delivering a report to a credit union, discovers it moved the sales comparison indication by $18,000, reissues a corrected report with the same effective date and a new report date, and emails both the loan officer and the review department that received the original.
More USPAP Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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