Page 16 - Bankruptcy Volume 1

Chapter 1

Introduction

Services to parties in interest in pending or potential bankruptcy proceedings, reorganizations and insol-
vencies are classified by AICPA standards as litigation and dispute resolution services. Litigation and
dispute resolution services are provided by a practitioner using accounting and consulting skills to assist
a client in a matter that involves a pending or potential formal, legal, or regulatory proceeding before a
"trier of fact" (such as a judge, jury, tribunal, regulatory body, arbitrator, mediator, special master or ref-
eree) in connection with the resolution of a dispute between two or more parties, even if that dispute
does not proceed to formal litigation. These services may be provided by a practitioner acting as a con-
sultant or as an expert witness. fn 1

The AICPA first identified bankruptcy and reorganization as specialized services in Consulting Services
Practice Aid 93-4, Providing Litigation Services, and then published Consulting Services Practice Aid
98-1, Providing Bankruptcy and Reorganization Services, dedicated to this area of practice. The practice
of bankruptcy and reorganization and the role of accountants in that process continues to evolve. The
number and size of complex filings and the sophistication of the stakeholders and the financial markets
in which they operate have increased, as has the market’s acceptance of a broad array of consulting as-
sistance that accountants can provide. The firms providing those services have also undergone transition,
with many practitioners now working not only in traditional accounting firms but also in independent
consulting firms, as a result of such factors as increasing demand for interim management services, addi-
tional restrictions imposed as a consequence of the Sarbanes-Oxley Act of 2002, and other changes in
the marketplace.

Professionals working in traditional accounting firms where attest services are performed should be
thoroughly aware of independence rules. Although such firms are able to perform substantially the same
services as other independent consulting firms when dealing with nonattest clients (absent firm policy to
the contrary), there are prohibitions against performing certain services for attest clients. Where attest
clients are involved, accountants need to determine which bankruptcy and reorganization services are
prohibited. fn 2

fn 1 The practice discipline of litigation services includes actual and potential disputes that may or may not proceed to formal litiga-
tion. Throughout this practice aid, the term litigation services includes litigation and dispute resolution services, unless otherwise indi-
cated.

fn 2 Refer to the "Nonattest Services" interpretation (ET sec. 1.295) under the "Independence Rule."

All ET sections can be found in AICPA Professional Standards.

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