The American Institute of Certified Public Accountants (AICPA) has released standards for forensic accounting service providers, also known as the Statement on Standards for Forensic Services No. 1 (SSFS 1). These long awaited standards are applicable to AICPA firms and employees of AICPA firms and are effective as of January 1, 2020. They provide clarification on a number of important topics to those providing litigation and investigation services and are the first official standards to do so.
While those executing investigation and litigation services have been applying similar rules on their own, the formal set of standards supports the AICPA’s efforts to ensure that consistency and a high quality of service are upheld on all engagements.
One of the most significant components of SSFS 1 is the release of the official definitions of litigation and investigation for forensic accounting purposes. When a member accepts an engagement that corresponds with either or both definitions specified, it is considered a “forensic engagement” and the member is required to abide by the standards set forth in SSFS 1. The definitions are 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.
While the definition of these terms is one of the major takeaways from SSFS 1, there are other significant items to note.
Forensic accountants and their clients should be aware of how the standards detail key considerations for the client/service provider relationship and how they establish boundaries on services that members can provide. The standards also define compensation for Certified Public Accountants (CPAs) providing these services, thereby eliminating any preexisting confusion.
The hope is that with SSFS 1 in place, the field of forensic accounting and the quality of service provided by CPAs in these engagements will thrive and these professional and ethical guidelines will continue to be built upon.
Ellin & Tucker’s Forensic and Valuation Services Group, led by Larry Pullen, works extensively with the Mid-Atlantic regions most prominent professional law practices, offering a wide-range of solutions and opinions for complex of litigation matters and valuation engagements. For more information, please visit the Forensic and Valuation services section of our website.