When a forensic accountant is hired to provide a valuation, it is important for them to remain
objective, demonstrate professional care, and maintain integrity in performance of the
engagement. As forensic accountants give their expert evidence on the day or days of the trial,
they must utilize their investigative, accounting, and auditing skills to ascertain the truth of
events as detailed in the financial statements. They calculate and quantify the loss, they
examine the disagreements in company acquisitions, and they study the business violations
that have occurred due to such losses and disagreements.
d d d d d d d A Forensic accountant must provide professional care to their clients. According to the
AICPA’s Code of professional conduct, “The quest for excellence is the essence of due care.
Due care requires a member to discharge professional responsibilities with competence and
diligence. It imposes the obligation to perform professional services to the best of a member's
ability with concern for the best interest of those for whom the services are performed and
consistent with the profession's responsibility to the public” (AICPA, 2013, ET Section
56.01). Integrity is vital for a forensic accountant. For one to have integrity, they must possess
the “quality from which the public trust derives and the benchmark against which a member
must ultimately test all decisions. Integrity requires a member to be, among other things,
honest and candid within the constraints of client confidentiality. Service and the public trust
should not be subordinated to personal gain an advantage. Integrity can accommodate the
error and the honest difference of opinion; it cannot accommodate deceit or subordination of
principle” (AICPA, 2013, ET Section 54.01/.02). Objectivity has similar traits in which the
professional has the obligation to be impartial, intellectually honest, and free of conflicts of
interest. Should he or she be in violation of those 3 principles, then there is no way to
maintain true objectivity.
It is no surprise that the forensic accountant’s expert witness testimony will carry
significant weight in the coming trial. While they were hired by the firm, they have a duty to
remain objective and behave with integrity and independence. This means that all data will be
factually based, backed up with significant data, and be as unimpeded by bias as possible. For
the expert witness, it doesn’t matter what the end result of the trial is, only that they are
operating under good faith and accurate information.
A forensic accountant’s professional responsibility is to follow the highest standards of
conduct prescribed by each professional conduct the individual belongs to and to employ the
degree of knowledge possessed by other member in the profession (Rufus, Miller, & Hahn,
2015). While there are principles in the AICPA Code of Conduct that accountants must
commit to maintain the public’s trust, there are rules of the Code that must be enforced. Those
rules are independence, integrity and objectivity, general standards, such as professional
competence and due professional care, compliance, accounting principles, as related to
GAAP, and lastly responsibilities to clients (Rufus, Miller, & Hahn, 2015). d
Exercising due professional care, as it relates to accounting means that a member should
observe the profession’s technical and ethical standards, strive to continually improve
competence and the quality of services, and adhere to their professional responsibility to the
best of their ability (Love & Eickemeyer, 2020). This means if the forensic accountant is not
skilled in providing reports on valuation losses, they need not engage with the client. The
forensic accountant must also demonstrate integrity and objectivity. For the forensic
accountant to have integrity, they must be honest and have a strong moral code within
themselves. This means the accountant should not stray from the truth to make the numbers
within a report look better than they are. Having objectivity means the accountant is not
biased to one party in the case and is only interested in presenting evidence that is factual. d
When accountants do not adhere to the rules and principles of a professional organization,
profound consequences may follow. For instance, if the violation is severe enough, one’s CPA
license could be revoked by state boards of accountancy (Marz, 2023). Other punishments
may be that the AICPA could expel or suspend your membership (Marz, 2023). To ensure the
above standards are fully followed, the forensic accountant should be diligent in making sure
all evidence gathered is relevant to the case. The forensic accountant should conduct
interviews with all parties involved thoroughly to get each side of the complaint. They must
do all this while at the same time maintaining objectivity in listening to statements and being
truthful when called upon as an expert witness by the court.
For the forensic accountant to remain objective, the accountant must examine his
relationships with all parties involved prior to accepting the engagement. The accountant
must be independent, with no ties to either part so no conflict of interest occurs. According to
the AICPA’s rules of professional conduct, “members shall maintain objectivity and integrity,
shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate
their judgement to others.” (Rufus, Miller, & Hahn, 2014)
According to the ACFE code of professional standards, the third standard relates to due
professional care. To demonstrate due professional care, the accountant should do the
following:
“Members shall exercise due professional care in the performance of their services, which
requires diligence, critical analysis, and professional skepticism.
Conclusions shall be supported with evidence that is relevant, competent and sufficient.
Members professional services shall be adequately planned and supervised.” (Rufus, Miller,
& Hahn, 2014)
This essentially means that the accountant should do extensive research into how the fraud
occurred. They must be able to obtain sufficient data that is relevant to the case and can help
them come to an unbiased conclusion. They need to ensure that they have planned enough
time to be able to thoroughly investigate this case. The accountant should ensure that he can
demonstrate professional competence, and if he or she can’t, they should not accept the case.
The accountant must also demonstrate confidentiality. They must only relay privileged
information with the client unless otherwise allowed by the client. d d d d d d d
If these standards are not followed, it could lead to a lack of trust from clients. The accountant
could lose clients and credibility if he or she acts outside of these standards. If the accountant
lacks objectivity and integrity, it may lead to a biased opinion. If the accountant lacks
competence in the required areas, it may prevent them from being able to obtain enough
sufficient evidence to support their conclusion.
When looking at this case, the first thing that stands out to me for the professional care and
objectivity is looking for conflict of interest. According to ACFE Standards of Professional
Conduct, this is one of the first steps and if conflicts are found, should be disclosed to the
client (Rufus et al., 2015). Next, I would also make sure that I am competent to complete what
is asked of me. This is also part of the ACFE Standards of Professional Conduct. In agreeing
to complete the worked asked, but not knowledgeable, this makes for a poor professional
appearance and lacks in integrity. This can also lead to not being able to complete the tasks
properly as well. If one does not know what to look for in order to request data and
information, then it may be missed. As discussed in our text, we need to be able to show all
ways that the fraud may or may not have happened. If we are not knowledgeable then we can
not show all ways. This lack of knowledge goes against all of the principles expressed in the
AICPA Principles of Professional Conduct (Rufus et al., 2015). One must also make sure that
data and evidence is obtained with care and due diligence. Evidence that is acquired by illegal
means can show poor professional care.
“Independence in appearance is the avoidance of circumstances that would cause a reasonable
and informed third party, who has knowledge of all relevant information, including
safeguards applied, to reasonably conclude that the integrity, objectivity or professional
skepticism of a firm or member of the attest engagement team is compromised.” (AICPA,
2021) Based on this definition, I feel that independence of appearance means that you can no
be influenced by another party to show favoritism or compromise judgement. This may be
difficult in some situations, as you have been hired to show that someone did or did not
commit a crime. I feel that if the accountant does their best to show all the ways that
something may have happened then they are independent in appearance.
AICPA. (November 2021). Plain English guide to independence.
After reading the details of the case one can rationalize why there is a need for forensic
accounting services, as they are needed to serve as a witness to the court and provide a
valuation for potential losses. Therefore one would have to demonstrate professional care,
objectivity, and integrity when performing these engagement services, which can be done by
assessing the possibility of fraud being committed and through the guidance provided by the
AICPA’s professional code of conduct. The Fraud Triangle can be an efficient tool, created by
Cressey, which analyzes the pressure, opportunity, and rationalization factors, that helps
signal for indications of fraud and knowing, “that influencing any one of these conditions can
impact the likelihood that fraud will occur” (Rufus et al., 2015, 149). Analyzing the
possibility of fraud allows one to exercise professional care because when one serve the court
in that role, one must, “independently and objectively develop our opinions—advocating for
the opinion and not the client per se,” which, “does not (and should not) prohibit a forensic
accountant from leveraging this expert’s skills to enhance management of the case” (Rufus,
2018, 110). Abiding by the AICPA’s code of professional conduct can serve as guidance to
remain objective and maintain integrity by making sure that, “prior to accepting an
engagement, members shall investigate for potential conflicts of interests, disclose any
potential conflicts to prospective clients,” and ensuring that one, “shall not knowingly make a
false statement when testifying in a court of law or other dispute resolution forum” (Rufus et
al., 2015, 301). If any issues or conflicts exist or are discovered, there can be negative impacts
when obtaining sufficient evidence or data to support that opinion because the forensic will
not be neutral and carry some bias when performing the engagement. One also has to
understand that in recent history, “even when law enforcement does pursue a case, financial
crimes are often difficult and expensive to prove,” because of, “the data-intensive nature of
such cases and the challenge of using circumstantial evidence to infer intent,” which is
necessary given that the land development company will have to prove the malicious intent to
commit fraud by engineer and architecture firm (Rufus et al., 2015, 156).
References
Rufus, R. J. (2018). The 3 W’s of Engaging a Forensic Accountant: Why, When, and Who.
American Journal of Family Law, 32(3), 108–114.
Rufus, R., Miller, L., & Hahn, W. (2015). Forensic Accounting. Pearson Education, Inc.
https://us.aicpa.org/content/dam/aicpa/interestareas/professionalethics/resources/tools/downlo
adabledocuments/plain-english-guide.pdf
Rufus, R., Miller, L., & Hahn, W. (2015). Forensic accounting. Upper Saddle River, NJ:
Pearson Education.
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic Accounting. Pearson Education (US).
https://mbsdirect.vitalsource.com/books/9780133867534
Love, V. J., & Eickemeyer, J. H. (2020, April). Fiduciary Duty, Due Care, and the Public
Interest. Retrieved from The CPA Journal: https://www.cpajournal.com/2020/04/03/fiduciary-
duty-due-care-and-the-public-interest/
Marz, M. (2023). Penalties for not following the Code of Conduct for Accountants. Retrieved
from Chron: https://work.chron.com/penalties-not-following-code-conduct-accountants-
17852.html
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic Accounting. Pearson.
https://us.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/downloadabledocu
ments/2013june1codeofprofessionalconduct.pdf
Federal Evidence Review. Federal Rules Of Evidence (2015) | Federal Evidence Review.
(n.d.). Retrieved February 6, 2023, from
https://web.archive.org/web/20180831001530/http://federalevidence.com/rules-of-evidence
