50 MULTIPLE CHOICE QUESTIONS WITH ANSWERS -VALUATION STANDARDS AS PER THE PROVISIONS OF THE COMPANIES ACT 2013 

Which of the following is a key principle in the valuation of assets?
a) Objectivity
b) Subjectivity
c) Randomness
d) Approximation
Answer: a) Objectivity
What must a registered valuer do if they lack the expertise for a specific valuation?
a) Proceed with the valuation
b) Decline the assignment
c) Outsource the work
d) Seek guidance from the client
Answer: b) Decline the assignment
Which factor is least likely to influence the fair value of an asset?
a) Market conditions
b) Historical cost
c) Future earning potential
d) Comparable sales
Answer: b) Historical cost
What should be done if a conflict of interest arises during the valuation process?
a) Disclose the conflict and continue
b) Withdraw from the assignment
c) Ignore the conflict
d) Consult with the company’s management
Answer: b) Withdraw from the assignment
Can a registered valuer be a full-time employee of the company they are valuing?
a) Yes
b) No
Answer: b) No
Which entity is responsible for maintaining the register of registered valuers?
a) Ministry of Corporate Affairs
b) Institute of Chartered Accountants of India
c) Insolvency and Bankruptcy Board of India
d) Securities and Exchange Board of India
Answer: c) Insolvency and Bankruptcy Board of India
What should a valuation report provide in addition to the fair value?
a) Basis and methodology of valuation
b) Valuer’s personal opinion
c) Company’s financial statements
d) Market analysis reports
Answer: a) Basis and methodology of valuation
When valuing a company for a potential merger, what is typically assessed?
a) Asset value
b) Liability value
c) Earnings potential
d) All of the above
Answer: d) All of the above
Which professional body provides certification for registered valuers in India?
a) Institute of Chartered Accountants of India
b) Insolvency and Bankruptcy Board of India
c) National Institute of Valuers
d) Securities and Exchange Board of India
Answer: b) Insolvency and Bankruptcy Board of India
What does the “market approach” in valuation involve?
a) Analyzing past transaction prices
b) Estimating future cash flows
c) Comparing similar market transactions
d) Evaluating replacement costs
Answer: c) Comparing similar market transactions
What is a primary consideration in the income approach to valuation?
a) Historical costs
b) Future earnings
c) Replacement cost
d) Market conditions
Answer: b) Future earnings
The Companies Act, 2013 mandates valuation by a registered valuer for which of the following purposes?
a) Issue of right shares
b) Determination of share swap ratio
c) Calculation of dividend payout
d) Annual audit
Answer: b) Determination of share swap ratio
Which of the following is NOT typically included in a valuation report?
a) Valuer’s qualifications
b) Detailed financial statements
c) Basis of valuation
d) Market analysis
Answer: b) Detailed financial statements
How should a registered valuer handle proprietary information obtained during the valuation process?
a) Share with all stakeholders
b) Keep confidential
c) Publicly disclose
d) Use for personal gain
Answer: b) Keep confidential
The valuation of intellectual property typically requires consideration of:
a) Replacement cost
b) Historical cost
c) Market transactions
d) Future income potential
Answer: d) Future income potential

What is the impact of non-compliance with valuation standards on a company’s financial statements?
a) Enhanced credibility
b) Reduced accuracy
c) Increased profitability
d) Decreased tax liabilities
Answer: b) Reduced accuracy
In case of undervaluation, who bears the primary responsibility?
a) Company
b) Registered valuer
c) Board of Directors
d) Registrar of Companies
Answer: b) Registered valuer
Which document outlines the qualifications and eligibility criteria for registered valuers?
a) Companies Act, 2013
b) Companies (Registered Valuers and Valuation) Rules, 2017
c) Insolvency and Bankruptcy Code, 2016
d) SEBI Regulations
Answer: b) Companies (Registered Valuers and Valuation) Rules, 2017
What is the role of a registered valuer in the context of financial reporting?
a) To audit financial statements
b) To assess the fair value of assets and liabilities
c) To manage company finances
d) To represent shareholders
Answer: b) To assess the fair value of assets and liabilities
The “cost approach” in valuation primarily considers:
a) Market transactions
b) Replacement cost
c) Future cash flows
d) Comparable sales
Answer: b) Replacement cost
What should a registered valuer do if they discover significant discrepancies during the valuation process?
a) Ignore the discrepancies
b) Report to the Board of Directors
c) Amend the valuation report
d) Withdraw from the assignment
Answer: b) Report to the Board of Directors
Valuation of which type of asset might require a specialist valuer?
a) Real estate
b) Machinery
c) Intellectual property
d) All of the above
Answer: d) All of the above
Who approves the valuation standards issued by the IBBI?
a) Ministry of Corporate Affairs
b) Parliament of India
c) Securities and Exchange Board of India
d) Board of Directors
Answer: a) Ministry of Corporate Affairs
For valuation purposes, what is the significance of “comparable transactions”?
a) They provide a basis for market comparison
b) They reflect historical costs
c) They represent future earnings potential
d) They determine book value
Answer: a) They provide a basis for market comparison
Which approach is best suited for valuing a startup company?
a) Cost approach
b) Income approach
c) Market approach
d) Liquidation approach
Answer: b) Income approach
What must be included in the scope of work for a valuation assignment?
a) Detailed asset listing
b) Methodology to be used
c) Timeline for completion
d) All of the above
Answer: d) All of the above
The valuation of shares for issue to employees under ESOPs must be done by:
a) Auditor
b) Company secretary
c) Registered valuer
d) Internal accountant
Answer: c) Registered valuer
What is the consequence of providing a false valuation report under the Companies Act, 2013?
a) Financial penalty
b) Suspension of registration
c) Imprisonment
d) All of the above
Answer: d) All of the above
Can a registered valuer value their own assets?
a) Yes
b) No
Answer: b) No
Which approach is typically used for valuing liquid assets?
a) Cost approach
b) Market approach
c) Income approach
d) Arbitrary approach
Answer: b) Market approach
What should a registered valuer do if their registration expires during an ongoing valuation assignment?
a) Complete the assignment without renewal
b) Renew the registration immediately
c) Transfer the assignment to another valuer
d) Inform the client and discontinue the assignment
Answer: b) Renew the registration immediately
What is the purpose of the Companies (Registered Valuers and Valuation) Rules, 2017?
a) To regulate the auditing profession
b) To set standards for accounting practices
c) To govern the registration and conduct of valuers
d) To outline the duties of company directors
Answer: c) To govern the registration and conduct of valuers
The valuation of a company’s goodwill is typically based on:
a) Market transactions
b) Future earnings potential
c) Replacement cost
d) Book value
Answer: b) Future earnings potential
Which method is commonly used for the valuation of a company’s machinery?
a) Market approach
b) Income approach
c) Cost approach
d) Historical approach
Answer: c) Cost approach
What must a registered valuer do if they encounter insufficient data during the valuation process?
a) Make assumptions based on available data
b) Proceed with the valuation regardless
c) Request additional information from the company
d) Abandon the valuation
Answer: c) Request additional information from the company
Which of the following is NOT a recognized professional qualification for a registered valuer?
a) Chartered Accountant (CA)
b) Company Secretary (CS)
c) Certified Financial Planner (CFP)
d) Cost and Management Accountant (CMA)
Answer: c) Certified Financial Planner (CFP)
What is the purpose of a fairness opinion in a valuation report?
a) To assess the objectivity of the valuation
b) To confirm the legal compliance of the valuation
c) To provide an independent assessment of the valuation
d) To review the financial statements
Answer: c) To provide an independent assessment of the valuation
Can a registered valuer provide valuation services to a company where they previously worked as an employee?
a) Yes, if sufficient time has passed since their employment
b) No, under no circumstances
c) Yes, if they disclose their prior employment
d) Only with approval from the Board of Directors
Answer: a) Yes, if sufficient time has passed since their employment
When valuing a company for a buy-back of shares, what is the primary factor to be considered?
a) Book value of shares
b) Market value of shares
c) Historical cost of shares
d) Future dividend potential
Answer: b) Market value of shares
Which document specifies the code of conduct for registered valuers?
a) Companies Act, 2013
b) Companies (Registered Valuers and Valuation) Rules, 2017
c) Insolvency and Bankruptcy Code, 2016
d) SEBI Guidelines
Answer: b) Companies (Registered Valuers and Valuation) Rules, 2017
How does a registered valuer determine the fair value of intangible assets?
a) By assessing their replacement cost
b) By analyzing future income potential
c) By comparing similar market transactions
d) By evaluating their historical cost
Answer: b) By analyzing future income potential
What should be the main consideration in the valuation of a loss-making company?
a) Book value of assets
b) Future earning potential
c) Historical performance
d) Replacement cost
Answer: b) Future earning potential
What is the significance of the date of the valuation report?
a) It indicates the currency of the valuation
b) It determines the methodology to be used
c) It affects the valuer’s compensation
d) It signifies the completion of the valuation process
Answer: a) It indicates the currency of the valuation
Which of the following best describes the term “valuation premise”?
a) The value derived from market transactions
b) The assumptions and conditions under which the valuation is conducted
c) The cost of replacing an asset
d) The historical cost of an asset
Answer: b) The assumptions and conditions under which the valuation is conducted
Can a registered valuer use both the income approach and market approach for a single valuation assignment?
a) Yes
b) No
Answer: a) Yes
In a merger, why is it important to use a registered valuer for the valuation of both companies?
a) To ensure compliance with legal requirements
b) To achieve an unbiased assessment
c) To establish a fair share exchange ratio
d) All of the above
Answer: d) All of the above
What should a registered valuer do if they realize they have made an error in their valuation report after submission?
a) Ignore the error
b) Inform the client and correct the report
c) Re-submit the valuation report without changes
d) Consult with legal advisors
Answer: b) Inform the client and correct the report
The valuation of shares for public issue must be done by:
a) Company secretary
b) Registered valuer
c) Auditor
d) Internal accountant
Answer: b) Registered valuer
What is the primary benefit of adhering to standardized valuation methods?
a) Increased valuation fees
b) Consistency and comparability
c) Simplified reporting
d) Reduced valuation time
Answer: b) Consistency and comparability
Can a company appeal against the valuation report if it disagrees with the findings?
a) Yes, through the National Company Law Tribunal (NCLT)
b) No, the valuation report is final
c) Yes, through the High Court
d) Yes, through the Securities and Exchange Board of India (SEBI)
Answer: a) Yes, through the National Company Law Tribunal (NCLT)