Art Collection Audits: Why, When, and How

Ensuring Accurate Valuation and Appraisal

Conducting regular and thorough audits ensure the accurate valuation of a collection, which is critical for financial reporting, implementing comprehensive insurance and receiving the correct price in potential sales. Due to the dynamic nature of the secondary art market, conducting detailed, periodic assessments of an art collection ensures its value reflects current market conditions and provides transparency and accuracy to buying and selling art.

Verifying Provenance and Authenticity

Verifying the provenance of a collection is crucial in establishing the history and legitimacy of the artworks. Audits uncover any inconsistencies in ownership or provenance claims which prevent potential legal disputes and enhance the credibility and reliability of a collector and their investments.

Risk Management and Insurance Purposes

The condition of an artwork can greatly impact its market value, and therefore audits provide invaluable information concerning the condition of a collection. Detailed condition reports ensure adequate insurance is provided by providing a documented baseline for claims, as well as mitigating legal risks related to damage, theft or loss of a piece. They also inform the implementation of risk management strategies concerning storage, transportation and display, which protect your artwork from potential future damage.

Estate Planning and Legal Compliance

In regard to estate planning, audits ensure the collection is comprehensively and accurately documented and appraised. This is particularly necessary so that all legal and tax obligations are met in the case of inheritance, donation or transaction. For a full breakdown of the recent tax adjustments and their impact on estate planning from the UK’s budget announcement on October 30, 2024, see our October Market Report.

Periodic Audits: Recommended Frequency and Significant Events

Audits should be conducted roughly every three to five years to maintain an up-to-date appraisal and understanding of a collection’s state and value. As audits play such a crucial role in significant events, such as inheritance, divorce or sale, regular reassessments ensure the division and distribution of assets are based on accurate valuations. Furthermore, as audits verify the condition and provenance of an artwork, they facilitate informed decisions surrounding market value and negotiation. After a new acquisition or donation, audits are required to integrate new pieces into the collection's inventory and ensure they are documented, valued, and authenticated.

Working with Qualified Professionals

When conducting an audit, it is best practise to enlist the help of qualified professionals to regularly update inventory and condition reports. This maintains an accurate and credible collection database which is able to reflect any changes in valuation, condition or insurance policy. Furthermore, collaborating with trusted experts with relevant experience and credentials ensures the privacy and security of sensitive audit information.

As an artist’s work increases in market presence and demand, it becomes increasingly important for appropriate audits to be commissioned in order to verify and authenticate any associated transactions. Although prominent artists including Jean-Michel Basquiat, Keith Haring and Roy Lichtenstein have all had authentication boards established to manage their estate, the reality is that the majority of them no longer exist due to the cost of law-disputes over authenticity. This means ensuring your artwork or collection is legitimate is even more crucial, and showcases the necessity of artwork audits.

Banksy

A primary example of an artist who recognised the importance of proper documentation and verification of his work is Banksy. As Banksy transitioned into selling his prints on the online market, an influx of overpriced and counterfeit prints emerged. Banksy’s work regularly sells for considerable sums, his highest selling piece Love Is In The Bin selling for £18.6 million at Sotheby’s in 2021, and so stringent documentation is absolutely necessary.

In order to mitigate the increasing number of fake Banksys, the artist set up his own authentication board, named Pest Control, in 2008. The non-profit handling service issues unique certificates of authentication (COA), humorously involving a half-torn fake ten pound note with the face of Princess Diana. Without this COA, no reputable collector will buy a Banksy piece, and in 2008 Pest Control found that 226 works of art, including 89 street pieces and 137 screen prints, had been falsely attributed to him.

Audits are an important part of proving an artwork’s legitimacy, and COA’s by the appropriate organisation are always required in order to possess comprehensive documentation.