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 week’s discussion of rules of evidence 702 and 703, relating to
expert witnesses. Rule 702, testimony by expert witnesses, pretty much makes it so that 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. 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. d 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 the
area of land valuation, he or she would be best served in gathering the findings of a land
surveyor who is an expert in that field. d 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/downloadabledocu
ments/2013june1codeofprofessionalconduct.pdf
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic accounting. Upper Saddle River, NJ:
Pearson Education.
Rufus, R. J., Miller, L. S., & Hahn, W. (2015). Forensic accounting. Pearson.
