AICPA Issues Exposure Draft of New Standard for Forensic Accounting Services by Richard A. Pollack, CPA/ABV/CFF, ASA, CBA, CFE, CAMS, CIRA, CVA

Posted on March 25, 2019 by Richard Pollack

Forensic accounting services can play a pivotal role in cases involving financial fraud, breach of contract, hidden assets, lost profits and economic damages. As demand for these services continues to increase, the American Institute of CPAs (AICPA) has released new professional standards that CPA’s performing forensic services must adopt for new investigation and/or litigation engagements beginning on or after January 1, 2020.

The AICPA’s Statement on Standards for Forensic Services No. 1 (SSFS No. 1) establishes a guideline of best practices for improving the delivery of forensic accounting services and protecting the public interests while also providing legal counsel with a benchmark for evaluating practitioners’ credentials and capabilities. Because it applies solely to matters involving investigation and/or litigation, the standard defines these terms as follows:

An investigation is a service performed in response to concerns of wrongdoing for which forensic accountants apply their skills “to collect, analyze, evaluate or interpret certain evidential matter to assist stakeholders 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.” Therefore, the term litigation refers not only to formal legal action and court trials, but it also applies to all other forms of disputes and dispute resolution.

Any services a forensic accountant provides that is beyond the scope of an actual investigation or litigation engagement are not bound by the SSFS No. 1. As an example, the new standard does not apply to work in which forensic accountants are retained to collect data for matters unrelated to an investigation or litigation, which could include business valuations and certain audits and attestations.

In general, the standard requires forensic accountants to exercise professional competence, due care, honesty and objectivity, and obtain “sufficient and relevant data to afford a reasonable basis for conclusions and recommendations.” While practitioners may provide expert opinions relating to their objective evaluation of evidence and whether or not such evidence is consistent with certain elements of fraud, they are prohibited from providing opinions as to the ultimate conclusion of fraud or legal determinations. That responsibility is reserved solely for judges or other triers-of-facts.

Finally, the standard prohibits forensic professionals and their firms from performing certain services on a contingency fee basis or entering into engagements in which there is a conflict of interest that may impair the forensic accountant’s judgment and objectivity.

About the Author: Richard A. Pollack, CPA/ABV/CFF, ASA, CBA, CFE, CAMS, CIRA, CVA, is director-in-charge of the Forensic and Litigation Support practice with Berkowitz Pollack Brant, where he has served as a litigation consultant, expert witness, court-appointed expert, forensic accountant and forensic investigator on a number of high-profile cases. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at