Not All Forensic Accountants Are Created Equal
Forensic accountants prepare reports and give accounting evidence for the purposes of legal proceedings. Good forensic accountants (‘Expert Witnesses’) can explain the complexities of accounting in simple terms. Here’s what to look for:
1. Request a Resume
Always ask for a copy of a potential forensic accountant’s resume. They need to be an experienced and well-respected Expert Witness.
Look for someone who has worked across number of different industries. They should also be able to draw from experience across a range of fields such as, personal injury, valuation, audit, taxation and accounting.
An understanding of writing reports and preparing accounting evidence for legal proceedings is essential.
2. Educate the Client
Most clients encounter a forensic accountant when they are experiencing financial stress or uncertainty. Naturally they often want to control the process (and the costs). Giving the client direct access to the Expert will help ensure the business or circumstances are explained first-hand.
It’s vital for the client to be educated about the legal process. They need to know how the Expert will fit into their case as well as addressing any questions that need to be answered.
3. The Grass Isn’t Always Greener
Avoid Experts who are biased or tainted in your favour. Although the client may not like an unbiased answer, the correct answer is always best. An intentionally favourable answer will be no help when presented before the opposition.
Engaging a bias Expert will always cost you more in the long-term.
Don’t be deterred if your Expert seeks advices from other professionals. A good forensic accountant understands where their expertise stops and knows who to contact in the industry to get you the best result.
We sometimes help clients by offering to initially provide an oral overview. Although these opinions are not fully considered they tease out most of the significant issues. This can work particularly well where the outcome is uncertain. It has at times resulted in an early decision to settle the case.
4. It’s in the Evidence
An Expert bases opinions on assumptions made and the instructions provided.
Any instructed assumption provided to the Expert will need to be supported by evidence. A good Expert will always disclaim their opinion may change should further evidence be provided.
5. Remember Independence is Paramount
The responsibilities of an Expert Witness have been considered by the Judiciary and are enshrined in case law and Court Rules. Any departure from independence or an unbiased opinion may render the evidence not only incorrect but self defeating.
In addition to these rules, Chartered Accountants and CPA’s alike are bound by professional and ethical standards. These ethical standards and Court Rules work together to ensure Experts:
- Are aware of their duty to the Court;
- Provide you with an objective and unbiased opinion;
- Consider all material facts;
- Advise you if the area is outside their area of expertise; and
- Produce a report that is easy to understand and based on reasonable assumptions.
It’s important to understand that there are a number of steps that the forensic accountant must follow in order to properly prepare their report. There are no shortcuts regardless of the size of the matter. However, costs can be kept to a minimum by being organised, concise and ensuring all parties understand the process.
Top Tips for Saving Costs
- Avoid sending a full brief of documents. Just forward the list of information you have on hand and ask the Expert to select which material or additional information they would like.
- Avoid providing information in a piecemeal fashion. Try to compile and deliver all the requested material in one bundle.
- Organise evidence from other Experts early. For example, in valuation work where an entity holds a property, arrange the property valuer’s report to be completed prior to engaging the forensic accountant.
- The client’s employees, bookkeeper or accountant may be able to assist in compiling evidence. Depending on the circumstances, we would recommend this is done in conjunction with the Expert. Using existing accounts staff or advisors can, at times, help compile the required documents and data in a more efficient and cost effective manner.