Calibration carry-forward at quarter-end: what the auditor actually wants in 2026

The most common question we field at quarter-end is some version of this: “the auditor’s valuation specialist sent over a list of follow-ups — what are they actually looking for?” The answer, in 2026, is more specific than it was even two cycles ago.

Calibration is now the centerpiece, not the appendix.

For PE-backed positions, audit-firm valuation specialists increasingly start their review at the calibration log — entry transaction, observable rounds, exit refinancings, comparable acquisitions — and work backward into methods. This reverses the older order, which started at the methods (DCF, market multiples, OPM) and treated calibration as a sanity-check appendix.

The shift reflects a regulator-driven preference for valuation procedures that are anchored, on every quarter-end, to observable transactional reality — not to model assumptions whose movement happens to produce convenient values. Calibration provides that anchor; methods provide the elaboration.

What “carry-forward” actually requires.

Carry-forward is not the same as carry-over. Carry-over is what happens when a quarter-end conclusion gets restated with a slightly different discount rate and the same value comes out. Carry-forward, by contrast, requires that every input has been re-evaluated against new data, and that any decision not to move a particular input has been documented with a defensible rationale.

• Discount rates. Refresh the build-up at every cycle: risk-free rate (current Treasury reads), equity risk premium (most recent published implied ERP), size premium (deciles update annually), and any company-specific premium. If the rate did not move, document why.
• Multiples. Refresh the public-comparable set: trading multiples shift with the cycle, and a stale set of public peers is the easiest thing for an auditor’s valuation specialist to flag.
• Calibration deltas. If the implied calibration discount rate has moved more than ~50bps since last quarter without a clear explanation in the record, expect a follow-up.

The deliverable that survives a workpaper review.

Three artifacts are doing most of the work in 2026 audit-firm reviews: the calibration log itself (with refreshed inputs and any held-constant rationales), the sensitivity table (typically ±10–15% on each major input, with the resulting fair-value impact), and the management estimate-overlay reconciliation (where the GP’s view differs from the model output, and how the gap closes). When all three exist and are coherent, audit follow-ups generally collapse to administrative cleanup. When any one is missing, the review tends to expand.

This is a methodology note, not legal or accounting advice. Apply to your facts and consult your auditor.