AICPA issues new forensic accounting standards
The American Institute of CPAs announced Wednesday that it has released new professional standards for forensic accountants.
The Statement on Standards for Forensic Services No. 1 provides more tailored authoritative guidance to CPAs who perform forensic accounting services. The SSFS 1 standards clarify the definitions of "litigation" and "investigation" for accounting purposes, detail key considerations for client and provider relationships, and establish boundaries on the services members can provide.
Under SSFS 1, forensic services provided for “investigation” or “litigation” are defined as follows:
- Investigation is a service performed in response to 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.
- Litigation is an actual or potential legal or regulatory proceeding before a trier of fact or a regulatory body as an expert witness, consultant, neutral, mediator or arbitrator in connection with the resolution of disputes between parties. The term litigation as used herein is not limited to formal litigation but is inclusive of disputes and all forms of alternative dispute resolution.
“These new forensic standards are the first time we are codifying best practices for litigation and investigation consulting work,” stated Annette Stalker, chair of the AICPA’s Forensic and Valuation Services Executive Committee. “Forensic accounting is a diverse practice, and this standard is unique because it is applied based on why a service is provided — litigation or investigation — rather than what skill set is employed.”
Developed by the AICPA’s Forensic and Valuation Services Executive Committee, the standard includes prohibitions on opining on the occurrence of fraud and performing certain forensic services for a contingent fee. The standard also provides more authoritative guidance to AICPA members who perform such forensic services.
SSFS 1 applies to all AICPA members, AICPA member firms and employees of AICPA member firms. The new standards take effect for new engagements accepted on or after January 1, 2020, with early adoption permitted.
For more information, head to the AICPA's site here.