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New Forensic Accounting Standards Issued By AICPA

By Chrissie A. Powers, CPA/CFF, CFE, CVA

The American Institute of Certified Public Accountants (AICPA) recently issued new professional standards for its members that provide forensic accounting services.

Statement on Standards for Forensic Services (SSFS 1), effective January 1, 2020, defines forensic accounting services as those involving "… the application of specialized knowledge and investigative skills by a member to collect, analyze, and evaluate certain evidential matter and to interpret and communicate findings (forensic services)."

The standards in SSFS 1 are applicable based on an engagement's purpose, not the skillset or services the member deploys. SSFS 1 applies when forensic services are performed in a litigation or investigation setting. The differentiating factor boils down to "why" the member was engaged (for example, to provide expert testimony to a trier of fact or to provide observations to a board of directors) rather than the skills the member will use to provide the forensic services.

Per SSFS 1, litigation engagements involve "an actual or potential legal or regulatory proceeding before a tier of fact or a regulatory body as an expert witness, consultant, neutral, mediator, or arbitrator in connection with the resolution of disputes between parties." SSFS 1 goes on to state, "The term litigation … is not limited to formal litigation but is inclusive of disputes and all forms of alternative dispute resolution."

SSFS 1 defines an investigation as "a matter conducted in response to specific concerns of wrongdoing in which the member is engaged to perform procedures to collect, analyze, evaluate, or interpret certain evidential matter to assist the stakeholders (for example, client, board of directors, independent auditor, or regulator) in reaching a conclusion on the merits of the concerns."

The general standards of the accounting profession still apply: having professional competence; exercising due professional care; planning and properly supervising the engagement; obtaining sufficient relevant data; as well as complying with the standards specific to forensic services. Those standards include: establishing an understanding and communicating with the client; performing services while maintaining integrity and objectivity; avoiding conflicts of interest; and avoiding contingent fee arrangements.

SSFS 1 clarifies that unless the member is the trier of fact, no member may opine on the ultimate legal issue in the dispute. "… a member performing forensic services is prohibited from opining regarding the ultimate conclusion of fraud … a member may [however] provide expert opinions relating to whether evidence is consistent with certain elements of fraud or other laws based on objective evaluation."

If you have specific questions regarding forensic accounting, please contact Powers Forensic Accounting, LLC at 614-745-5192.

Chrissie A. Powers, CPA/CFF, CFE, CVA

Chrissie A. Powers, CPA/CFF, CFE, CVA

Powers Forensic Accounting, LLC

150 East Mound Street, Suite 308
Columbus, OH 43215-5429

614-745-5192

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