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For valuation engagements

An Australian appraisal engagement letter that fixes the intended use

Almost every dispute about a valuation is a dispute about what it was for. The engagement letter is where that is decided, in advance, in one sentence.

A value is meaningless without its purpose. The same asset is worth different amounts for a sale, a tax filing, a matrimonial settlement, an insurance claim and a set of accounts, and a report prepared for one of those is misleading if it is used for another.

Last reviewed against 1 primary source.

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Appraisal engagement letter

The full letter in Word and PDF, written for Australia, covering intended use, the standard of value and the scope of work.

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Type in your firm, the client, the scope and the fee, and it writes a complete engagement letter for Australia, ready to print or save as a PDF. Nothing you type is stored.

Next step: send it to the client through FirmHello, where it stays on their record beside everything else they send you.

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So the appraisal letter does something the others do not: it names the intended users, and it says plainly that nobody else may rely on the report. That single clause prevents most of the trouble in valuation work.

The five things a valuation letter must fix

  1. 1

    The intended use, and the intended users

    Both, by name. The report is prepared for a stated purpose and for stated users, and the letter says that no other party may rely on it and that it may not be used for any other purpose.

  2. 2

    The standard of value

    Market value, fair value, investment value, liquidation value — these are different numbers with different definitions, and the client will not distinguish them unless you do.

  3. 3

    The effective date

    A valuation speaks as at a date, which is frequently not the date of the report. Say both, and say that events after the effective date are not reflected.

  4. 4

    The scope of work, and its limits

    What you will inspect, what you will accept from management, what you will not verify. A desktop valuation and a full appraisal are different engagements and should never be confused in correspondence.

  5. 5

    The report type and who may see it

    A valuation, a limited scope valuation or a calculation, the three engagement types in APES 225. Restrictions on distribution, publication and attachment to any document, together with what happens if the client wants that.

The appraisal engagement letter

Written for Australia. The downloads are the same text, as a Word document to edit and a PDF to put on your letterhead.

[Firm letterhead]

[Date]

[Client name]
[Client address]

Dear [Client contact],

The engagement

We will estimate the [standard of value] of [describe the subject asset, business or interest, including the percentage interest and whether it is controlling or marketable] as at the effective date of [date].

Intended use and intended users

The valuation is prepared solely for [the stated purpose] and solely for the use of [named intended users]. It may not be used for any other purpose, and no other party may rely on it.

The report may not be distributed, published, quoted from, or attached to any other document, in whole or in part, without our prior written consent.

Scope of work

Our work will include [document review, management interviews, inspection or its absence, market and industry research, and the approaches to value we expect to consider].

We will rely on financial and other information provided by management without auditing or verifying it. This is not an audit, a review or a compilation, and we express no assurance on any financial information.

The effective date

Our conclusion will be as at [date]. Events occurring after that date are not reflected, and we have no obligation to update the report for anything that happens afterwards unless separately engaged to do so.

The report

We will issue [a valuation report / a limited scope valuation report / a calculation report], which will set out the information relied on, the assumptions and limiting conditions, the approaches considered, and our conclusion. A calculation of value is not a conclusion of value and the report will say so.

Fees

Our fee is [amount] in Australian dollars, invoiced [when] and payable within [number] days. Our fee is not contingent on the conclusion reached, on the occurrence of any transaction, or on any other outcome. Testimony and any update are charged separately at [rate].

Confidentiality and retention

We keep the engagement and the information you provide confidential except where the law, a court or our professional body requires disclosure. We hold information in accordance with the Privacy Act 1988 and retain our file for [number] years.

Agreement

Please sign and return a copy before we begin.

[Name], [Firm name]

Agreed by [Client name]:

Signature ______________________ Date ____________

Before you use this

Supplied as-is, with no guarantee. These templates are general information, not legal advice, and not a substitute for it. Have your own legal adviser review and adapt one to your practice and your jurisdiction before you put it in front of a client. FirmHello accepts no responsibility or liability for any use made of them.

Valuation engagements under APES 225

Australian accountants value businesses, interests and assets under APES 225 Valuation Services, revised for services from 1 January 2025. It requires the terms to be documented under APES 305 and lists what the engagement document itself must contain.

APES 225 recognises three engagement types. In a valuation engagement you are free to use the approaches and procedures a reasonable third party would. A limited scope valuation engagement restricts that freedom. In a calculation engagement you and the client agree the approaches and methods in advance.

Name the type, define all three

The letter must state which type you are engaged to perform, where that is known, and include the definitions of all three. For a calculation engagement it must also set out the approaches, methods and procedures agreed.

The automatic downgrade

For a valuation engagement, the letter must warn that if you find a limitation that could materially affect the value, the engagement becomes a limited scope valuation engagement. Clients rarely expect it, which is why the standard requires the warning.

Independence, stated

Where the valuation requires independence or claims it, the letter must confirm your independence, and APES 225 bars a contingent fee. Every letter must also state that the service follows APES 225.

Other experts' names

If you engage a property or plant valuer, APES 225 stops you disclosing their opinion or their name without their prior consent, unless the law requires it. Obtain that consent before the report is drafted.

How valuations get misused

Repurposed by the client

A valuation prepared for internal planning appears in a transaction. The intended-use clause is what makes that the client's problem rather than yours.

A calculation quoted as a conclusion

The two have different scopes and different reliability. If the letter does not distinguish them, the summary email will not either.

The date nobody noticed

Value as at a date twelve months before the report was read, in a market that moved. Say the effective date twice.

Other engagement letters

What it is Engagement letters Fiduciary accounting Fiduciary Legal services Legal

Questions about appraisal engagements

Can the report be shared with a lender or a buyer?

Only if they were named as intended users, or you consent in writing afterwards. Adding a user usually means reconsidering the scope, because a party relying on the report may need more than the original one did.

Can an appraisal fee be contingent on the value reached?

No. It is prohibited by valuation standards and it destroys the credibility of the work. The letter states that the fee is not contingent for exactly that reason.

What is the difference between a calculation and a conclusion of value?

A calculation applies agreed procedures to reach a calculated value and is narrower in scope; a conclusion of value reflects the full analysis the standards require. They are not interchangeable, and the report must say which it is.

Do we need to inspect the asset?

It depends on the standard, the purpose and the asset. What matters for the letter is that the scope says clearly whether you will, because a desktop valuation that reads like a full appraisal is the easiest kind of report to attack.

Sources

The primary sources this page is written against, last read against it on . Check them before relying on a detail; rules and thresholds change.

  1. APESB APES 225 (Oct 2024) effective 1 Jan 2025

What changed

  • Added an editable Word (.docx) copy of the letter beside the PDF.
  • Added the section on what Australian law adds, written from primary sources, and reviewed the shared letter text for wording that only US law supports.

The letter is the easy half

Sending it, getting it back signed, and finding it again in two years is the half that eats the week. That is what the portal is for.

No card and no sales call. If you would rather tell us about your firm first, use the longer form.