Dealing with complex financial issues, identifying fraud or tracing assets, can be a daunting task when handling legal matters for a client. For many attorneys, retaining the services of a forensic accounting expert is an integral part of resolving the financial aspect of a legal battle or investigating a fraud claim. Forensic accounting experts specialize in financial disputes that require investigative skills and financial knowledge to analyze, interpret and present the financial matters in a format that is clear and easy to understand for attorneys, judges or a jury.
Forensic accounting experts with significant business backgrounds and investigative experience provide valuable insight into the legal process. They play an important role in a legal case either before or during litigation. In many cases, these experts can help parties settle the case in lieu of proceeding with costly litigation. Forensic accounting experts must hold one or more of the following credentials: Certified Public Accountant (CPA), Certified Financial Forensics (CFF), Certified Fraud Examiner (CFE) or Master Analyst in Financial Forensics (MAFF).
Forensic accounting experts collaborate with attorneys in a variety of legal matters such as:
- Family Law cases
- Breach of Contracts
- Shareholder/Partner Disputes
- White Collar Criminal Investigations
- Estate Trustee Disputes
- Due Diligence Investigations
- Bankruptcy & Insolvency
Services provided during litigation include:
- investigation and analysis of financial documentation and business records;
- development of schedules to assist in the analysis and presentation of financial evidence;
- review of the opposing expert’s report to determine the strengths and weaknesses of the positions taken;
- assist in the preparation of subpoenas, interrogatories or deposition questions;
- preparation of reports, exhibits and collections of documents for settlement or trial; and
- testify in depositions or court and prepare visual aids in support of their testimony.
When to Retain a Forensic Accounting Expert
It is important to engage this expert early on in the case. The expert can help to make a preliminary assessment and assist with developing strategies related to the case. They can assist with identifying the types of documents needed through discovery and preparing the attorney for deposing the opposing party or opposing experts.
Communication with your Forensic Accounting Expert
At the onset of the engagement, it is important that the attorney establish what methods of communication they would like the expert to use when sharing information with the legal team and the client. Depending if the expert is hired as a consulting or testifying witness will determine what communication is discoverable. Forensic accounting experts have broad backgrounds and often may provide alternative strategies that the attorney may not have considered. Open and regular communication between the attorney, client and expert will ensure the expert has all the necessary information to maximize efficiencies and minimize fees for the engagement.
Discovery & Document Production for a Forensic Accounting Expert
Once the expert is retained, discuss with them what documents and financials they will need in order to perform an analysis and provide an opinion. Documents obtained through discovery should be well organized and bates stamped prior to sending to your expert. When documents are sent over without a bates stamp, the expert may employ their own numbering system. This could be problematic because the stamp will differ from the attorney’s documents. The utilization of a bates stamp allows the expert to easily reference a particular transaction on a document when performing the analysis or when giving testimony.
Engaging the expert early on in the case saves the attorney and client money by making the discovery process more effective. The expert becomes part of the legal team and can assist with the following:
- Preparing document requests from the opposing party. An integral part of any litigation case is the type of documents the attorney receives. If documents are omitted or only partial documents are provided, this may hinder your expert’s ability to provide a complete financial picture of the case at hand. This can lead to embarrassing cross-examination scenarios that can undermine the entire case.
- Prepare questions for deposition or cross-examination of the opposing expert, if there is one.
- Assist with the subpoena process. This will ensure the proper documents and transaction details will be requested from the financial institutions. In addition to the bank or investment statements, most experts will request check images, copies of items that make up a deposit, detailed information on transfers between accounts and details concerning wire transfer.
Keep in mind the forensic expert relies on having a thorough set of documents in order to perform a comprehensive analysis to determine income, calculate damages, trace assets or identify fraud.
Preparing the Forensic Accounting Expert for Deposition or Trial
The attorney and expert should spend time together preparing in advance for depositions and trial testimony. This will afford the expert the opportunity to know and anticipate what types of questions to expect on direct and cross-examination. In addition, the attorney will have a greater understanding of how the expert will testify. Preparing an expert for their testimony is not only beneficial to the attorney and his client’s case, but is also beneficial to the expert. Due to the specialized nature of a forensic accounting expert’s testimony, they require even more preparation than a lay witness does. A well-prepared expert can be decisive in proving or disproving claims made during testimony.
The decision to hire a forensic accounting expert can be critical to the outcome of any legal matter, either before or during litigation. Given their investigative mindset, forensic experts bring a level of professional skepticism to the engagement and are willing to look beyond just the numbers in order to put the pieces of the puzzle together to tell a story.