What is a forensic accountant not allowed to say about fraud?
That fraud occurred. AICPA Statement on Standards for Forensic Services No. 1, paragraph 10, says so in terms: “The ultimate decision regarding the occurrence of fraud is determined by a trier of fact; therefore, a member performing forensic services is prohibited from opining regarding the ultimate conclusion of fraud. This does not apply when the member is the trier of fact. A member may provide expert opinions relating to whether evidence is consistent with certain elements of fraud or other laws based on objective evaluation.” The ACFE CFE Code of Professional Standards arrives at the same place from a different direction at section V.B.2: “No opinion shall be expressed regarding the legal guilt or innocence of any person or party.”
AICPA SSFS No. 1 and the ACFE CFE Code of Professional Standards are membership obligations rather than rules of evidence, and they bind different people. SSFS No. 1 is effective for engagements accepted on or after 1 January 2020 and is enforceable against AICPA members under the Compliance With Standards Rule (ET sections 1.310.001 and 2.310.001); its applicability turns on the purpose for which the member was engaged, litigation or investigation, rather than on the skill set employed (paragraph 3). It does not reach forensic work performed as part of an attest engagement or under the tax standards (paragraph 2), or internal assignments from an employer to an employee member not in public practice (paragraph 5). The ACFE Code, adopted by the ACFE Board of Regents on 1 November 2020, binds Certified Fraud Examiners, a credential that requires no accounting license. An expert who is neither an AICPA member nor a Certified Fraud Examiner is not reached by either document, which is worth establishing about any expert on either side of a matter.
What can a forensic accountant conclude, if not that it was fraud?
Nearly everything short of the verdict. The ACFE’s Interpretation and Guidance to section V.B.2 states that a fraud examination report may include “conclusions that a person misappropriated cash, misrepresented a transaction, concealed funds and so on,” and that, provided it has a reasonable basis in fact, “any conclusion of this sort that focuses on a person’s conduct, rather than on their legal guilt or innocence, is permissible.”
The ACFE Interpretation and Guidance is unusually concrete for a professional standard on this point. It supposes a criminal fraud statute with four elements — a material false statement, made with knowledge of its falsity, relied upon by a victim, causing harm to the victim — and states that a Certified Fraud Examiner may conclude that each of those elements is satisfied. “But this is where the CFE’s conclusions must stop. They are not permitted to then give the opinion that the suspect is guilty of the crime of fraud, because that decision must be left to the judicial system.” AICPA SSFS No. 1 permits the same shape of opinion in its own vocabulary: whether evidence is consistent with certain elements of fraud or other laws.
So the popular summary, that forensic accountants cannot say fraud happened, is wrong in the opposite direction, and repeating it gives away conclusions the standards expressly allow. The ACFE Interpretation and Guidance goes further still, offering as a permissible model statement a report reading “there is sufficient evidence to believe that [the Subject] might have committed a crime, and I recommend that this matter be referred to the appropriate law enforcement agency for investigation.” The finding survives. Only the label is withheld.
Is saying it was fraud also a problem under the rules of evidence?
Yes, by an entirely separate route, which is why the answer does not change for an expert who holds neither credential. In United States v. Scop, 846 F.2d 135 (2d Cir. 1988), the chief investigator of an SEC regional office, testifying as a government expert, gave opinions that certain individuals had been active participants in what he called a manipulative and fraudulent scheme, phrasing his testimony throughout in language drawn directly from the statutes charged. The Second Circuit held that those repeated statements embodying legal conclusions exceeded the permissible scope of opinion testimony, reasoning that Rule 704 was not intended to allow experts to offer opinions embodying legal conclusions, and reversed all but the false-declaration convictions.
Federal Rule of Evidence 704(a) is the provision most often misread as permission. It says an opinion “is not objectionable just because it embraces an ultimate issue,” which is narrower than it looks: not objectionable just because, rather than not objectionable. United States v. Scop is the correction, and the Second Circuit was explicit about what would have survived — had the witness merely testified that controlled buying and selling of the kind alleged can create artificial price levels to lure outside investors, no sustainable objection could have been made. An opinion may embrace an ultimate issue of fact and still fail because it is phrased as a legal conclusion, and the difference lives in the vocabulary. Describing how a series of transfers was structured is a factual conclusion. Adopting the statute’s own terms is not. Rule 704 was not amended in the December 2023 package.
For retaining counsel the practical consequence runs the opposite way from how it is usually framed. An expert who reaches for the label has given opposing counsel a motion to file and a cross-examination line built out of the expert’s own professional standards. Exclusion is not automatic, and that is not really the point. The sentence buys nothing that the rest of the report has not already earned, because the factfinder was always going to decide it.
Can a forensic accountant testify about what someone knew or intended?
In a criminal case, no. Federal Rule of Evidence 704(b) provides that “in a criminal case, an expert witness must not state an opinion about whether the defendant did or did not have a mental state or condition that constitutes an element of the crime charged or of a defense.” Fraud prosecutions turn on mental state more than almost any other category of case, which makes Rule 704(b) the live constraint on a criminal-side forensic accounting expert rather than a technicality.
Diaz v. United States, 602 U.S. 526 (2024) narrowed the rule’s reach without touching its text. The Supreme Court held, six to three, that expert testimony that most people in a group have a particular mental state is not an opinion about “the defendant” and so does not offend Rule 704(b), leaving the defendant’s own mental state to the jury. Justice Jackson’s concurrence emphasised that Rule 704(b) is party-agnostic, so the opening runs in both directions, and commentators reading Diaz for the white-collar bar have flagged that the answer to a Diaz-style opinion is a Rule 702 reliability challenge to the underlying group-behavior evidence rather than a Rule 704(b) objection.
In civil matters Federal Rule of Evidence 704(b) does not apply at all, and practitioners regularly assume that its absence leaves no bar on state-of-mind testimony. There is one. The In re Rezulin Products Liability Litigation line, 309 F. Supp. 2d 531, 546 (S.D.N.Y. 2004), holds that expert opinions on the intent, motives or states of mind of corporations “have no basis in any relevant body of knowledge or expertise,” and courts applying it have excluded such opinions as unreliable and unhelpful under Rule 702 and as unfairly prejudicial under Rule 403.
One consequence deserves saying plainly, because the professional standards and the rules of evidence are not congruent. The ACFE Interpretation and Guidance permits a fraud examination report to conclude that a subject knew a statement was false, treating that as a conclusion about the subject’s conduct. Federal Rule of Evidence 704(b) permits no such opinion from an expert about a criminal defendant at trial. A professional standard is not a safe harbour from the rules of evidence, and a report written to the outer edge of what AICPA SSFS No. 1 and the ACFE Code allow can still contain sentences the expert cannot speak from the stand.
What does correctly scoped forensic accounting testimony sound like?
Narrower and duller than most people expect. In United States v. May, 131 F.4th 633 (8th Cir. 2025), the FBI’s forensic accountant testified to cash deposits in excess of $15,000 into the defendant’s bank accounts in 2015, against less than $500 in cash deposits the year before, and the Eighth Circuit characterized that testimony as circumstantial corroboration. The witness described a change in a pattern in the records, and stopped there.
Nothing in the United States v. May testimony asserts that anyone took a payment, that anyone knew anything, or that any arrangement existed. The factfinder was left to supply the inference, which is the design rather than a shortcoming of it. Describe the movement, describe the change, stop. That structure keeps a witness inside AICPA SSFS No. 1 paragraph 10, inside ACFE section V.B.2, inside Federal Rule of Evidence 704 and inside the legal-conclusion bar simultaneously, without anyone having to hold four rules in mind halfway through an answer.
Federal Rule of Evidence 702(d), as amended on 1 December 2023, is why this matters beyond tidiness. The subsection now requires that “the expert’s opinion reflects a reliable application of the principles and methods to the facts of the case,” and the Advisory Committee Note describes the amendment as especially pertinent to the testimony of forensic experts. It is an anti-overstatement provision, aimed at opinions that outrun what the analysis can support. The sentence “this was fraud” outruns any analysis, because no accounting method produces a verdict.
Does this mean a forensic accountant cannot put a number on the loss?
No. The prohibition in AICPA SSFS No. 1 paragraph 10 runs to the ultimate conclusion of fraud, not to quantification, and nothing in the ACFE CFE Code of Professional Standards restricts what a report may total. The ACFE’s own model report language, published in its Interpretation and Guidance as an example of a permissible statement, is a dollar figure: “It is my opinion that [Client] has suffered losses of $XXX as a result of cash skimming and payroll disbursement schemes between [Date 1] and [Date 2].”
Treating AICPA SSFS No. 1 paragraph 10 as a division of labor between professions is the mirror error, and a litigator will catch it in one sentence. The AICPA’s Certified in Financial Forensics credential lists economic damages among the core competencies it validates, alongside fraud detection and investigation, financial statement misrepresentation, bankruptcy and insolvency analysis, and expert witness services. NACVA’s Core Body of Knowledge for the Master Analyst in Financial Forensics carries Commercial and Personal Damages, lost profits included, as a specialty area alongside Business Fraud and Deterrence. The same practitioner very often does both halves of the work in the same matter.
The line worth drawing is by question rather than by profession. Reconstructing what moved through an account is an operation on the historical record and ties out to produced documents. Measuring what a loss was worth requires assuming a state of the world that did not happen, and that belongs to our Economic Damages Institute, which covers lost profits, the but-for analysis and the valuation machinery properly. Federal Rule of Evidence 703 is what lets one matter carry both experts: a damages expert may rely on the reconstructed factual record as the predicate for a model, provided experts in the field would reasonably rely on that kind of data. This Institute covers whether that record will hold.