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).
The AICPA’s (American Institute of Certified Public Accountants) Code of Professional Conduct
provides rules for its members to abide. The AICPA serves as the leading source of guidance for
accountants in public practice and while membership is voluntary, members must adhere to the code.
According to ET section 54 article III, integrity, which is tied to the principles of due care,
independence, and objectivity, requires members to strictly adhere to client confidentiality (Rufus,
Miller, & Hahn, 2015). This would mean that the forensic account in this case would need to maintain
confidentiality with the land developer. The forensic accountant would not be able to use any
information the client provided in confidence to try and gain evidence or data to support their own
opinion. Breaking client confidentiality would not only carry repercussions from the AICPA, but
could damage the forensic accountant’s career (and impact past or other present cases they are
working on). ET section 56 article V requires members to be competent and diligent through
education, experience, thorough service, and adherence to applicable standards (Rufus, Miller, &
Hahn, 2015). If the forensic accountant did not have experience in land development, either through
education or prior experience, due care would not be met. Without due care, the forensic accountant
may not know what evidence is useful in the case. ET section 55 article IV discusses the principle of
objectivity and requires members to be impartial, honest intellectually, and free of conflicts of interest
(Rufus, Miller, & Hahn, 2015). If the forensic accountant had any ties to any of the parties involved or
any stake in the game personally, objectivity would be impossible and the likelihood of gathering
sufficient data or evidence would be nearly impossible.
This prompt ties closely to last weeks discussion of rules of evidence 702 and 703, relating to expert
witnesses. Rule 702, testimony by expert witnesses, pretty much makes it so that in order for the
forensic accountant to be considered and expert witness, the professional codes of conduct relating to
professional care, integrity, and objectivity must first be met.
In this scenario, the forensic accountant is hired to provide a valuation for losses and to serve as an
expert witness to support their findings. The forensic accountant has a professional responsibility to
perform this engagement in a certain type of way. The guidance for such a performance is found under
the AICPA’s Code of Professional Conduct, ACFE’s Code of Professional Standards, and NACVA’s
Professional Standards. All of these have 6 common qualities that are important for the forensic
accountant to have. This includes integrity, objectivity, competence, due professional care, sufficient
data, and professional behavior (Rufus et al., 2014).
If the forensic accountant in this situation has the appropriate education, experience, certifications, and
training, then they will be better equipped to act with professional care (Rufus et al., 2014). If they
aren’t qualified, then they should not take on the engagement because they wouldn’t be able to obtain
sufficient evidence to support their opinion. They must demonstrate professional care by getting a
clear understanding of the scope and objective of the engagement, be aware that there is a possibility
of fraud, errors or conflict of interest, and they must perform examinations/verifications to support
their stance.
The forensic accountant would demonstrate objectivity by having no conflict of interest with those
involved in this situation. The accountant should evaluate their relationship with anyone involved in
the engagement. If, for example, they had a past relationship or may have a future one with the client,
then this may impair the accountant’s objectivity. They may lean in favor of their client and would not
have unbiased & reliable data to support their opinion. Integrity can be demonstrated by leading with
honesty, trustworthiness and truthfulness.
All of these qualities are examined when the forensic accountant is under cross-examination. The
judge will bring up any conflict of interest, they will question the accountant’s credentials/expertise
and if, while under cross-examination, the accountant isn’t consistent, then they may be lacking
integrity. All of these qualities have a big impact on the trustworthiness of the forensic accountant.
It would be very important for the forensic accountant chosen to represent the land development
company to be independent and free from conflicts of interest. z The next important requirement would
be for the accountant to have some demonstrated knowledge in the field of land valuation and how to
calculate a loss on this land. According to section 102, in the AICPA, knowledge of professional
standards methodologies, the technical subject matter involved, and the capacity to use that knowledge
in the delivery of professional services can be defined as competence (ET. Sec. 201.2).
This might impact the forensic accountant's ability to obtain sufficient evidence or data to support his
or her opinion because while the accountant may have strong knowledge in land valuation, he or she
would be best served in gathering the findings of a land surveyor who is an expert in that field. The
issue with having to outsource this type of data is that the forensic accountant loses some control and
it would be harder to verify that the surveyor is objective and free of conflicts.
While the article, entitled, "My Journey as a Forensic Accountant," begins by discussing how this
individual entered the industry, the second part of the article, "The Customer (or client) is Not Always
Right," applies more to our discussion. This portion of the article, discusses integrity, objectivity, and
independence.
References:
https://us.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/downloadabledocuments/201
3june1codeofprofessionalconduct.pdf
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic accounting. Upper Saddle River, NJ: Pearson
Education.
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.
