Forensic accounting

June 1, 2013

The AICPA has made available to members an online guide detailing which states and cities require CPAs practicing forensic accounting to be licensed as a private investigator (P.I.).

More than 40 states have enacted laws requiring P.I.s to buy a license to operate in their state. Most of those regulations have gone into effect during the past five years, according to research done by the AICPA Forensic & Valuation Services (FVS) Section.

Based on feedback from AICPA members, the FVS Section believes many CPAs are unaware that they might be breaking state laws regarding P.I. licensing. Penalties for operating as a P.I. without a license vary, but in some states it is a felony.

To spread the word to the CPA community, the FVS Section is making available to AICPA members an online matrix designed to help CPAs determine whether the tasks they perform in their practice require them to obtain a P.I.’s license in the states and/or cities in which they do business. The matrix of P.I. licensing requirements for CPAs previously had been available only to FVS members.

While the scope and complexity of P.I.-licensing laws and statutes vary nationwide, they all impose licensing requirements on individuals participating in activities associated with private investigations. Because forensic accountants conduct research- and document-based investigations, they often fall under the purview of these laws. In addition, some CPAs specializing in information technology perform work, such as digging for information in computer files, that could require them to register as P.I.s.

The requirements for obtaining a P.I. license, like the penalties for failing to do so, vary greatly by state. In some states, the statutes specifically exempt forensic CPAs from the licensing mandate. In other states, including Virginia, the P.I.-license exemption is extended only to CPAs based in that state.

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