Forensic and Valuation Ethical Responsibilities to Remember

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Forensic and valuation services professionals are required to follow various authoritative standards for professional responsibilities and ethics. The most important standards that apply to forensic and valuations services professionals are the American Institute of Certified Public Accountant (AICPA) Code of Professional Conduct, Statement on Standards for Consulting Services (SSCS) No. 1, and the Statement on Standards for Valuation Services (SSVS) No. 1. These standards can be found on the AICPA’s website (aicpa.org).

The AICPA Code of Professional Conduct applies to members of the AICPA. However, most states and courts have extended the application of the code to all Certified Public Accountants(CPA). Most state CPA boards of accountancy codes of professional conduct mirror the AICPA code. The code has 4 major sections: the preface which applies to all members, part 1 which applies to members in public accounting, part 2 applies to members in business, and part 3 applies to all other members, such as those who are not currently employed.

The topics which are most applicable to forensic accountants are integrity, objectivity, and conflict of interest. Maintaining integrity means the professional conducts oneself in accordance with an ethical code and is not affected by corrupting influences and motives. Objectivity means that an individual is impartial, intellectually honest, disinterested, and free from conflicts of interest. According to section 1.110.010 of the codes, in performing a professional service for a client, a conflict of interest may occur if a member or the member’s firm has a relationship with another person, entity, product, or service that in the members’ professional judgement, the client or other appropriate parties may view as impairing the member’s objectivity.

A forensic accountant may encounter a variety of different ethical threats. These threats include, adverse interest, advocacy, familiarity, management participation, self-interest, self-review, and undue interest.

It is the forensic accountant’s responsibility to identify these threats, evaluate the significance of a threat, and recognize and apply appropriate safeguards. If a safeguard cannot reduce the threat to an acceptable level as judged by a reasonable and informed third party, the forensic accountant should not perform the service and should terminate the relationship that caused the ethical conflict.

If a professional violates the AICPA Code of Professional conduct, the AICPA may expel a member, suspend him or her from the AICPA for a period of up to two years, or admonish a member. Most state boards of accountancy have similar codes of conduct to the AICPA’s. Therefore, the professional will most likely violate a state board statute. This could result in the suspension or loss of a CPA’s license to practice or other penalties.

The Statement on Standards for Consulting Services (SSCS) No. 1 applies to AICPA members who provide consulting services for clients. The standard applies to most non-attestation and tax services such as forensic and valuation services. The standards cover areas such as professional competence, due professional care, planning and supervision, client interest, understanding with the client, and communication with the client.

The Statement on Standards for Valuation Services (SSVS) No. 1 applies when services involve estimating the value of a subject interest including, a business or business ownership interest, a security, or an intangible asset.

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James Trubenbach-Byrne Trevor Shaw, CPA
T (609) 520 1188
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.

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