An appraiser learns that a prior report they signed contained a material error. The appropriate response is:
Correct Answer
B) Notify the client and correct the record appropriately
Why this is correct: The governing concept is the appraiser's ethical duty under USPAP to maintain the integrity of the profession and the public trust. When a material error is discovered, the appraiser must promptly notify the client and take steps to correct the record, as this preserves transparency and fulfills the obligation to the integrity of the work. Why the other choices are wrong: 'Take no action, since the report was already delivered' is wrong because delivery does not absolve the appraiser of the responsibility to correct a material error. 'Wait until the client discovers the error independently' is wrong because it violates the duty of candor and could be seen as deceptive. 'Destroy the workfile to avoid the appearance of fault' is wrong because it violates the Record Keeping Rule and compounds the original error into a more serious ethical breach. Exam tip: Remember the core ethical principles: honesty, transparency, and proper record-keeping. When an error is material, prompt disclosure and correction are always required.
Why This Is the Correct Answer
Notifying the client and correcting the record is what keeps the report from continuing to mislead and is the response the Conduct section requires. Prompt action limits the harm and preserves the appraiser's credibility far better than waiting. The correction must reach the intended users, so a corrected report that references and supersedes the original is usually the right vehicle. The workfile should record when the error was found, what it was, and how it was addressed.
Why the Other Options Are Wrong
Option A: Take no action, since the report was already delivered
Delivery does not end the appraiser's responsibility, because intended users are relying on the report after delivery, which is exactly when the harm occurs. Treating transmission as a cutoff would let known errors persist indefinitely. The obligation not to communicate results in a misleading manner is continuing rather than momentary.
Option C: Wait until the client discovers the error independently
Waiting for the client to find the error trades the appraiser's integrity for a chance that nobody notices, and if the error surfaces later the delay becomes evidence of concealment rather than mere oversight. Meanwhile decisions are being made on faulty information. Silence in the face of known material error is a form of misleading communication.
Option D: Destroy the workfile to avoid the appearance of fault
Destroying the workfile violates the Record Keeping Rule's retention requirements and converts a correctable mistake into deliberate misconduct. It also destroys the very documentation that might show the error was honest rather than reckless. Enforcement bodies treat workfile destruction as among the most serious violations an appraiser can commit.
A Standing Report Keeps Speaking
A delivered report does not go silent. It keeps telling intended users something every time they rely on it. If what it says is materially wrong and you know it, you are still communicating the error.
How to use: In any discovered-error item, choose prompt notification and correction. Reject inaction, waiting, and anything touching the workfile other than documenting what happened.
Exam Tip
Materiality is the filter. An error that could affect an intended user's decision requires correction; a trivial clerical slip may simply be documented.
Common Mistakes to Avoid
- -Assuming responsibility ends at delivery
- -Correcting a file copy without notifying the client or reissuing the report
- -Altering or discarding workfile contents after an error surfaces
Concept Deep Dive
Analysis
The Ethics Rule's Conduct section requires an appraiser to perform assignments with impartiality, objectivity, and independence, and it prohibits communicating assignment results in a misleading manner. A report known to contain a material error keeps communicating that error every day it stands uncorrected, because intended users continue relying on it. Discovering the mistake therefore creates a present obligation, not merely a regret about the past. Materiality is the threshold: an error is material if it could reasonably affect an intended user's decision or the value conclusion, which distinguishes a typographical slip in an address from a transposed square footage or a comparable that turned out not to be arm's length. The response is to notify the client promptly and correct the record in a way the intended users will actually see, typically by issuing a corrected report referencing and superseding the original, and to document the discovery and the correction in the workfile. State licensing law may add its own reporting obligations, and many appraisers notify their errors and omissions carrier as well.
Background Knowledge
You need the Ethics Rule's Conduct section, including the prohibition on misleading communication, and the Record Keeping Rule's workfile retention requirement of at least five years after preparation or two years after any judicial proceeding in which the appraiser testified, whichever is longer. You should also understand materiality and how corrected reports supersede originals.
Real-World Application
An appraiser discovers she used the wrong gross living area for a comparable, changing her conclusion by four percent. She notifies the client the same day, issues a corrected report that references and supersedes the original, explains the change, and memorializes the discovery and correction in her workfile.
More USPAP Questions
Which statement best defines a hypothetical condition under USPAP?
According to the Competency Rule, if an appraiser lacks the knowledge and experience to complete an assignment competently, which action is NOT acceptable?
An appraiser runs only the sales comparison approach on a standard tract home and omits the cost and income approaches. Under Standard 1 this is:
A value opinion for a subdivision as if fully built out two years from now is what kind of assignment, and what does it require?
A hypothetical condition differs from an extraordinary assumption in that a hypothetical condition:
An appraiser must disclose in the certification whether they have:
A client-imposed requirement — 'use only comps from our approved list' — is best described as:
Under Standard 1, when developing a real property appraisal, an appraiser must:
The certification required by Standards Rule 2-3 must be signed by:
According to Standard 1, when developing an opinion of market value, an appraiser must analyze:
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam