Best Practices for Working with Forensic Accountants by Richard A. Pollack

Posted on February 12, 2013 by Richard Pollack

Regardless of whether a trial lawyer is representing a plaintiff or a defendant, the forensic accountant can be invaluable for those cases involving challenging financial issues or economic damages.  By relying on carefully honed skills to investigate, uncover and substantiate often-complicated financial transactions, forensic accountants can scour through mountains of data to connect seemingly random events in order to identify hidden assets, uncover indicia of fraud, simplify and explain complicated concepts in a way that can be easily understood by the trier of fact, and enable you to make better case decisions. 

In addition to identifying financial facts, forensic accountants can also lend their expertise to other aspects of your legal strategy.  For example, they can assist you to prepare effective document requests and interrogatories during the discovery phase; they can draft specific questions helping you to better challenge opposing expert testimony during deposition; and they can serve as invaluable assets during settlement negotiations.

When working with forensic accountants, legal counsel should consider the following

Start Early.  Retain a forensic professional as early as possible to help identify the accounting and financial considerations of your case, from the beginning. This will assist you to better assess the strengths and weaknesses in your case in building or altering a defendable legal strategy going forward.  Moreover, by hiring a forensic accountant early on, you can maximize his/her credibility and contributions to your case while minimizing your long-term expenditures of time and money.

Share Information.  Provide your forensic accountant with all relevant documents – the good and the bad – that will enable him/her to accurately analyze financial data, assess damages and identify vulnerabilities in your case.  By initially retaining the forensic accountant as a non-testifying expert, the privilege between you and your client is extended to the work product of that between you, your client and the forensic accountant.  While this role may ultimately transform into that of a testifying expert, until you are comfortable with this decision, the forensic accountant’s work is protected.

Share Expertise.   Make sure your forensic accountant understands how his/her opinions will fit into your case.  You should share with him/her the allegations in the complaint, including causation and mitigation, as well as appropriate case law that supports damages or valuations.  Legal counsel should become equally knowledgeable about the forensic accountant’s work and his/her assumptions in order to present them in a manner in which a judge or trier of fact will find them easy to understand. Keep in mind that your expert should be using “provable and reasonable assumptions” that comply with admissibility requirements under Frye and Daubert.  If not, the court may exclude your expert’s testimony and the data he/she presents.

A forensic accountant can supplement even the best attorney’s case by applying his/her knowledge to simplify the complex and provide fair, objective and independent expert testimony.  Working in tandem with an accountant early on and with full disclosure, a forensic accountant can provide a unique perspective that can prove to be the key element in bringing about a favorable legal outcome. 

Article written by Richard A. Pollack,

Richard Pollack is director in charge of the firm’s Forensic and Business Valuation Services practices. For more than 30 years he has served as a litigation consultant, expert witness, court-appointed expert, forensic accountant and forensic investigator. His team’s creative use of accounting forensics and investigations have assisted bankruptcy courts; the SEC; municipalities, school boards and government agencies; the FBI and numerous other agencies to prove or defend against allegations. As an expert witness he has testified in both federal and state courts. A frequent speaker, panel moderator and author, Pollack co-wrote Calculating Lost Profits, an AICPA practice guide about lost-profit damage analysis and professional standards in the field.