Abstract: Litigation services are gaining popularity with CPAs. However, many practitioners may not be aware of which professional standards and ethics rules apply to such engagements. This article reviews the major rules and discusses their relative importance to litigation NATURE OF SERVICES A litigation service is any professional assistance CPAs provide to lawyers in the litigation process. Anecdotal evidence shows that more than 90% of CPAs' litigation activities fall into one of these areas: business valuations, damage calculations, forensic accounting, accounting principles, accounting and statistical analyses, tax issues and accountant and auditor professional performance. Some CPA firms provide litigation services in areas requiring expertise in other disciplines, such as engineering. The nature of a CPA's litigation-related activities can vary. In addition to serving as expert witnesses, CPAs serve as arbitrators or mediators in disputes and as consultants. Some CPAs are called on to serve as receivers, both in bankruptcy matters and for other special purposes. (For example, recently I was appointed receiver for a company to ensure the payment of a judgment.) It is important to remember that in court the individual, not his or her firm, is the testifying expert. However, the lawyer and the litigant view the firm as providing the service. If a problem arises with the service, the firm, and not just the individual, will be the subject of a complaint. So although you are the only representative of your firm in the court, your performance will reflect on your partners and staff, too. APPLICATION OF STANDARDS The accounting profession has four major sets of technical standards: management consulting services (MCS) standards, auditing standards, attestation standards and accounting and review services standards. Generally, litigation services engagements are subject to the MCS standards and exempt from the others. However, any standard could come into play in an engagement. (Other authoritative and nonauthoritative literature, such as that relating to tax practice, personal financial planning, quality control and peer review, does not apply to litigation services unless the issue is the quality of performance in providing one of those services.) MCS standards. The statements on standards for consulting services (SSCS) include the following definition: Transaction services, in which the practitioner's function is to provide services related to a specific client transaction, generally with a third party. Examples of transaction services are insolvency services, valuation services, preparation of information for obtaining financing, analysis of a potential merger or acquisition, and litigation services. (AICPA Professional Standards, CS section 100.05d). The SSCS require compliance with the general standards of the profession contained in Rule 201 of the Code of Professional Conduct: professional competence; due professional care; planning and supervision; and sufficient relevant data (discussed below). The SSCS also require compliance with the following standards: client interest, understanding with client and communication with client. (See the sidebar for more details.) * Serving the client interest in a litigation services engagement calls for helping the client win the case. However, as stated in the client interest standard, integrity and objectivity must be maintained in the process. Thus, while it is appropriate to present the client's position in a favorable light, the presentation cannot be misleading. But that admonition does not mean you cave in under cross-examination. The opposing lawyer will, for example, try to get you to say it is just as appropriate to use assumptions favorable to his or her position or belittle your assumptions. The client-interest standard demands that you defend positions properly taken. * The principle in the understanding-with-client standard is as important in a litigation services assignment as in any other type of engagement, but it requires a knowledge of the litigation process. …
Publication Year: 1997
Publication Date: 1997-04-01
Language: en
Type: article
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