Effective use of the forensic CPA

During the course of your work, you may have called on a forensic CPA for assistance. It may have been for the assessment of commercial damages or to perform a fraud or criminal investigation. You may have hired one to calculate future lost earnings related to personal injury or to prepare a business valuation for a shareholder dispute or estate matter. Perhaps you engaged a forensic CPA to determine financial motive in an arson case.

As with most things in life, some attorney experiences with CPA experts have probably been good and some, well, not so good. So how can you get the most out of your forensic CPA relationships?


Call early

One of the top ways to compromise the effectiveness of any expert is by delaying the expert's involvement in the process. Some attorneys are hesitant to call in the hopes of controlling the cost of outside experts. Others think of CPAs as expert witnesses only at trial and, consequently, delay their involvement.

There are also those who mistakenly think if they gather some financial information on their own, it will make the process smoother. Whatever the reason, most delays in making that phone call will result in weakening the expert's value to the process.

The initial phone call does not have to result in the start of a full-scale engagement. In fact, it may only be for assurance purposes, as sometimes there is no need for further involvement on the part of the expert.

On the other hand, many times the immediate involvement by the forensic CPA is required for developing the document request effectively, follow-up interrogatories or important deposition questions.

Having expert financial assistance to develop a well-drawn document request and insightful deposition questions is the first step toward negotiation and, ultimately, a reasonable settlement. The bottom line is that it does not hurt and, in fact, can only help the situation to call the forensic CPA early in the process.


Communicate throughout

Advanced and regular communication is required to properly manage the work, and ultimately the bill, of the forensic CPA. The attorney should be very specific in his or her instructions right from the start. That will serve to avoid unnecessary or duplicate work, as well as the omission of important procedures, on the part of the expert.

The attorney should discuss the overall strategy with the expert. Often an attorney may discuss what needs to be done but omit the reason. CPAs dedicated to forensic accounting and expert witness services have a broad background and a great deal of experience in dealing with these types of financial matter.

If the attorney discusses strategy with the expert, the expert may be able to suggest alternatives that the attorney had not even considered.


Determine relevant experience

Engaging a CPA with forensic accounting and litigation experience should be a must. Litigation support and expert testimony are very different from more traditional accounting, which typically involves tax return preparation and auditing for a client with whom the CPA has had a cooperative relationship for many years.

Forensic CPAs have to be much more creative and adaptable. They are often faced with many adversarial relationships that a more traditional CPA may be unprepared to handle. These situations require the ability to be forthright yet tactful.

Forensic CPAs must also have a broad business background and be perceptive to differing methodologies, techniques and record-keeping options. They must be able to delve into the situation in spite of disorganized or incomplete records.

Engaging an experienced CPA who has no expertise in forensic accounting and litigation support could result in the attorney paying for the CPA to get the proper training or experience. Even a very talented CPA who has no previous forensic accounting experience will have to spend some time getting up to speed in forensic techniques and methods and the litigation environment.


Evaluate supporting credentials

The CPA expert's credentials are an important part of the decision-making process. The attorney should look for an expert with relevant credentials governed by the American institute of Public Accountants, National Association of Certified Valuation Analysts and other relevant organizations.

Some of the more pertinent credentials are: Master Analyst in Financial Forensics, Certified Fraud Examiner, Certified Business Appraiser, Accredited in Business Valuation, Certified in Financial Forensics, and Certified Valuation Analyst.

The CPA expert also should be an active participant in the organizations that monitor the relevant designations and continuing educational requirements.


Weigh costs vs. benefits

During the initial telephone call, the attorney should begin to evaluate the extent of involvement warranted for the forensic CPA. If the issue is relatively small, the lawyer may be able to proceed after only a short conversation with the expert.

In more complex situations, the attorney may want more extensive involvement on the part of the expert to help develop effective document requests, interrogatories, deposition questions and ultimately expert testimony.


Review previous testimony

Attorneys should look at previous cases to see the opinions and reports the CPA expert has issued for deposition or trial.

Counsel also should find out whether an expert has been subject to Daubert challenges or has had his or her opinion excluded at trial. That is a critical part of the selection process.


Control costs when possible

One way to keep billings under control is to remember that attorneys should not always request a formal, detailed written report. The CPA's financial analysis can be made in financial schedules. A shorter, less formal report can serve well in many instances for effective negotiation and settlement proceedings.

In many situations, the lawyer could make the most effective use of the expert's time by hiring the expert for a meeting or teleconference to help explain the analysis and reach a mutually agreeable settlement.

Formal reports are more appropriate for cases that are definitely going to trial and have complicated fact patterns. If appeal is a factor, a formal detailed report will undoubtedly become a welcomed part of the attorney's records.


Stephen L. Ferraro is a partner at Ferraro, Amodio & Zarecki CPAs, based in Saratoga Springs, New York. He can be contacted at sferraro@fazcpas. com.

Published: Mon, Jul 02, 2018


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