The AICPA has issued an exposure draft titled Statement of Standards for Forensic Services No. 1 (SSFS 1), Forensic Services: Definitions and Standards. If approved, the standard will be effective for new engagements accepted on or after May 1, 2019.
SSFS 1 was created by the AICPA’s Forensic and Valuation Services Executive Committee.
The purpose of the standard is to improve the consistency and quality of forensic services provided by CPAs.
It appears the AICPA is being responsive to a growing demand for forensic services. A report created by IBISWorld (a market research firm) showed that employment in forensic accounting grew at an annualized rate of 18% from 2012 to 2017.
SSFS 1 covers the following types of forensic services (per paragraph .01 of the proposed standard):
SSFS 1 includes two prohibitions:
Why can’t a member provide a legal opinion regarding fraud? The final determination of whether fraud exists is determined by the “trier-of-fact,” according to paragraph .08 of the standard.
The standard would apply to all AICPA members, AICPA members firms, and employees of AICPA member firms.
Paragraph .03 of the standard states “the key consideration of this Statement’s applicability is the purpose  (e.g., Litigation or Investigation) for which the member was engaged.” The applicability is not based on a particular service provided such as data analysis. But if data analysis, for example, is performed in relation to litigation or investigative services, then the statement would apply.
The understanding with the client regarding the nature, scope, and limitations of the services can be written or oral.
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Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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