Background:
The Auditor General needs a consultant to assist in performing valuation advisory services on a sample of managed investments by Alberta Investment Management Corporation (AIMCo) and Heritage Fund Opportunities Corporation (HFOC).
The Auditor General will select a sample of approximately 10 to 20 of AIMCo and HFOC managed investments for review by the consultant. This sample will be used both in the completion of substantive procedures and test of AIMCo’s and HFOC’s processes. The consultant’s resource teams will make reasonable efforts to integrate their knowledge in providing valuation advisory services to the Auditor General.
Work required:
Valuation Advisory Services
For each AIMCo and HFOC investment reviewed, the consultant will be provided a “Subject Valuation Report” which is the valuation report prepared or obtained by management of the AIMCo or HFOC investee. The consultant will have to complete the following:
- Assess the adequacy and reasonability of the methodologies employed for the investment's valuation based on information in the Subject Valuation Report. Identify any other methodologies which should have been employed, either on an alternative basis or in conjunction with existing methodologies employed in the Subject Valuation Report.
- Assess the reasonability of key assumptions used in the Subject Valuation Report (e.g., discount rate components such as: beta, risk premium, capital structure and growth rates) based on information contained in the Subject Valuation Report and the consultant's technical expertise. Identify any assumptions that appear insufficiently supported in the Subject Valuation Report or instances where the assumption appears implausible, unreasonable or conceptually unsound based on information in the Subject Valuation Report and the consultant's technical expertise.
- Assess the reasonability of valuation benchmark metrics applied in the Subject Valuation Report (e.g., comparable public company trading or transaction prices). Identify any other metrics which should have been included and address in the Subject Valuation Report, either as corroborating evidence or contradictory evidence. However, the consultant has no obligation to conduct research to obtain corroborating or contradictory evidence.
- Identify the source of material unobservable inputs in the Subject Valuation Report (e.g., revenue, growth rates, profit margins, capital expenditures) and assess the sufficiency and appropriateness of procedures that management and/or the external valuator carried out to determine and validate such inputs as reported to the Consultant.
- Where an assumption in the Subject Valuation Report has been selected from a range, assess whether the range appears appropriate. Also assess the quality of support provided in the Subject Valuation Report in selecting a single point estimate for the assumption from within the range. Consider whether selection of assumptions at high or low ends of the range indicate a bias in the overall valuation represented by the Subject Valuation Report.
- Where it is readily feasible, quantify the impact on the Subject Valuation Report of any significant concerns identified as a result of procedures in this section described above.
- Consider whether the valuation represented in the Subject Valuation Report has been prepared is consistent with the requirements of IFRS 13.
Reporting
The consultant needs to prepare reports summarizing the observations of the valuation advisory services based on the scope of procedures outlined above.
For any significant observations or findings reported by the consultant in writing, the consultant will provide an assessment and comments on the following:
- The root cause(s) of the observation or finding;
- If there were internal controls at AIMCo or HFOC that were inappropriately designed and/or implemented, as they relate to the observation or finding; and
- If appropriate segregation of duties was not maintained in the preparation of the valuation reports.
On-call Valuation Advisory Support
The consultant may provide consultation on matters that may arise during the course of planning and executing the scope of work for AIMCo and HFOC managed investments by the Auditor General. Examples include:
- Emerging valuation issues
- Industry trends and analysis
- Identifying relevant existing authoritative guidance or literature
