Final answer:
Professional judgment must be used in gathering and evaluating evidence, considering qualitative factors, applying valuation approaches and methods, and interpreting and communicating results in carrying out a valuation.
Step-by-step explanation:
In carrying out a valuation, professional judgment must be used in several ways.
- Gathering and evaluating evidence: Professionals need to gather relevant information and data to make informed decisions about the value of an asset or a company. They must evaluate the credibility and reliability of the evidence to ensure accuracy in their valuation.
- Considering qualitative factors: In addition to quantitative data, professionals must consider qualitative factors that can impact the value of an asset. These factors may include market trends, industry dynamics, and management capabilities.
- Applying valuation approaches and methods: Professionals must apply their expertise and knowledge to select appropriate valuation approaches and methods that align with the specific context and purpose of the valuation. They need to make judgments about the most suitable approach and method to ensure an accurate valuation.
- Interpreting and communicating results: Finally, professionals must interpret the valuation results and effectively communicate their findings to clients or stakeholders. They need to use their judgment to explain complex concepts in a clear and understandable manner.