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Overview of the statement on standards for forensic services

The American Institute of Certified Public Accountants (“AICPA”) recently issued the Statement on Standards for Forensic Services No. 1 (“SSFS 1” or the “standard”), which has an effective date for engagements accepted on or after January 1, 2020.  The standard applies to any member of the AICPA, or employee of a member firm, who provides services to a client as part of a litigation or investigation engagement. 

For purposes of the standard, a litigation engagement is defined as:

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 dispute resolution.

An investigation engagement is further defined as:

A matter conducted in response to specific concerns of wrongdoing in which a 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.

As demonstrated by these definitions, the key consideration regarding applicability of SSFS 1 is the purpose for which a member is engaged (i.e., in a litigation or investigative engagement), rather than a specific skill set or service provided.

When a member accepts an engagement that meets one or both of the definitions set forth above (herein after referred to as a “forensic engagement”), the member is required to undertake all work with:

  • Professional competence;
  • Due professional care;
  • Adequate planning and supervision;
  • Sufficient relevant data;
  • Integrity and objectivity;
  • A clear understanding with the client about the responsibilities of the parties, and the nature, scope and limitations around the services to be performed; and
  • Adequate communication to inform the client of any conflicts of interest, significant reservations surrounding the scope or benefits of the engagement; and significant engagement findings or events.

In addition to the requirements set forth above, SSFS 1 also requires that:

  • A member engaged as an expert witness in a litigation engagement may not provide opinions under a contingent fee arrangement, unless explicitly allowed under the Contingent Fee Rules; and
  • Members refrain from rendering any opinions regarding the occurrence of fraud, as that is a determination for the trier of fact.

Why is the standard important and relevant?

  • CPAs who provide services in forensic engagements have always adhered to a set of standards that generally applied to all members of the profession, and which are consistent with those set forth is SSFS 1.  However, a standard specific to forensic engagements was never codified.  SSFS 1 now does that.
  • SSFS 1 clarifies and removes confusion around the types of engagements that may be performed.  For example, the standard specifically precludes the performance of an agreed upon procedures (“AUP”) engagement in a situation where the member is engaged as an expert witness by one of the parties to provide an expert opinion, since an AUP engagement does not result in an opinion.
  • SSFS 1 removes uncertainty about how CPAs and their firms may be compensated for their work in forensic engagements, as well as what type of opinion, if any, can be provided in connection with the investigation of suspected fraud.
  • The standard continues to build on the professional and ethical guidelines that are followed by CPAs and their firms, which enhances the quality of services provided by CPAs in forensic engagements.

For more information on this topic, or to learn how Baker Tilly specialists can assist you, contact us.

Dave Duffus is a member of the AICPA’s Forensic & Litigation Services Committee and had the opportunity to provide input into the standard during its development.

David M. Duffus
Partner, CPA/ABV/CFF, CFE
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