November 2011
The Role of the Forensic Accountant
With recent news such
as the Conrad Black
scandal, you might
think forensic accounting
is a fairly recent
branch of the accounting profession. You
might be surprised to learn that it's an ageold
art that has been around for centuries.
Many people associate forensic accounting
with the uncovering of fraud.
It's actually so much more. Forensic
accountants quantify economic damages,
trace, locate and evaluate assets, analyze
accounting records and provide evidence
in criminal matters. Forensic accountants
often provide litigation support in
assessing economic losses in connection
with a civil matter such as bodily injury.
The stages of the process the forensic accountant
can be involved in are:
- Initial contentions of parties (i.e.
statement of claim). Based on these
contentions, the forensic accountant
will provide questions and requests to
obtain the necessary documentation
to support or refute the contentions.
This provides structure and limits the
amount of documentation, which is
more cost-effective.
- Preliminary assessment of the initial
documentation before the examination
for discovery. Based on the
documentation received, the forensic
accountant forms a preliminary assessment
of the potential economic loss,
identifies potential areas of economic
loss and provides a listing of questions
to be asked at the examination
for discovery. This may trigger legal
counsel to negotiate and settle, as often
the economic-loss estimation by one
of the parties is determined by the forensic
accountant to be unreasonable.
- Attendance at the examination for discovery
to review the testimony, assist
with understanding the financial issues
and provide additional questions to be
asked.
- Review the examination for discovery
to determine if there were inconsistencies
between the examination for
discovery and the contentions of the
parties.
- Review the opposing expert's report
on damages to provide an initial assessment
of the reasonableness of the
expert's opinion, critique the methodology
and assumptions to understand
both the strengths and weaknesses of
the positions taken and prepare an
opinion report with alternative calculations.
The strength of your expert's
report is dependent on the number
and type of assumptions made.
Involvement early in the process will
reduce the assumptions in the report,
which will help the report stand up to
aggressive cross-examination.
- Assistance with alternate dispute
resolutions and negotiations, as often
the experts will be able to agree on the
reasonableness of assumptions and/or
methodology.
- Attendance at trial to provide assistance
with cross-examination questions
and provide an expert opinion on the
economic damage quantification.
From the start to the end of the case, the
forensic accountant can be of assistance. In
all forensic accounting matters, a forensic
accountant should be retained early in
the process in order to obtain maximum
benefit and streamline your costs.
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