When two approaches produce nearly identical indications and a third diverges sharply, the reconciliation should:
Correct Answer
B) Explain the divergence rather than simply ignoring it
Why this is correct: Explain the divergence rather than simply ignoring it. A significant divergence between approaches is analytical information. The appraiser should investigate and explain the likely cause (e.g., data issue, market anomaly) to strengthen the credibility of the final reconciled value. Why the other choices are wrong: Discard the divergent approach without comment fails USPAP's requirement for reasonable analysis. Adopt the divergent figure as the most informative is illogical without a specific reason. Average all three to split the difference is an unjustified mechanical averaging. Exam tip: An unexplained divergence weakens the report; an explained one can strengthen it.
Why This Is the Correct Answer
Why this is correct: Explain the divergence rather than simply ignoring it. A significant divergence between approaches is analytical information. The appraiser should investigate and explain the likely cause (e.g., data issue, market anomaly) to strengthen the credibility of the final reconciled value. Why the other choices are wrong: Discard the divergent approach without comment fails USPAP's requirement for reasonable analysis. Adopt the divergent figure as the most informative is illogical without a specific reason. Average all three to split the difference is an unjustified mechanical averaging. Exam tip: An unexplained divergence weakens the report; an explained one can strengthen it.
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