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The level of litigation support an accounting firm can provide runs deep. In this issue, we take a brief look at three of the key areas in which an accountant can help attorneys win cases: Forensic Accounting, Valuation, and Expert Testimony.

Forensic Accounting: The Domain of the Super Sleuth
A forensic accountant is cut from a different cloth – tweed, perhaps, since the first actor who played the famous detective, Sherlock Holmes, was… an accountant! (If you are a trivia buff, here are the details: www.holmesonscreen.com/miscellanymain2.htm

This unique specialty requires the accountant to integrate accounting, auditing and investigative skills to unearth missing data and reconstruct a financial paper trail that may have been altered by one of the parties in a case. The resulting accounting analysis becomes the basis for courtroom discussion and, ultimately, dispute resolution.

As an example of how forensic accounting might be useful in a divorce case, here are just a few ways a spouse might hide marital assets:

• Under-representing (legitimately or otherwise) company assets and profits.
• Salary paid to a nonexistent employee, and the checks are voided after the divorce is final.
• Money paid from the spouse’s business to someone who will give the money back after the divorce.
• Cash kept in the form of traveler’s checks.
• And countless other’ subtle practices that a forensic accountant is adept at uncovering.

Forensic accountants are also instrumental in business dissolutions, fraud investigations, and other matters.

Valuation: Digging Deep into Business Matters
Question: How do you know a valuation is needed?
Answer: Any time a business matter is on the table.

A valuation defines the worth of a business by setting values for all assets, both tangible and intangible. This is an important tool in many litigation scenarios, including cases involving closely-held corporations, family partnerships, professional practices, shareholder disputes, bankruptcy, estate and gift valuations, defining worth of marital assets, buy/sell agreements, mergers and acquisitions, liquidations and sales, business interruptions, and many other matters.

A few key elements to look for in a well-written valuation report:

• Statement of purpose – the purpose needs to clearly tie-in with the valuation method chosen and the information selected for inclusion in the valuation process.
• Detailed discussion of the valuation method used – to ensure that the end result is fair and accurate.
• Consistency and logic – the report should support the conclusion of the value beyond a shadow of a doubt.

Expert Testimony: Characteristics of a Winning Expert Witness
If your case hinges on testimony by an accountant expert witness, be selective about who you put on the stand. Your expert should be:

• Well trained and credentialed.
• Able to frankly admit when there is doubt with respect to the evidence.
• More concerned about seeking the truth than they are about trying to win you – their client – over.
• Of the highest character, with a reputation for impeccable integrity.
• Prepared to support opinions with factual evidence.
• Highly professional, both inwardly and in outward behaviors.
• Experienced and knowledgeable about the law.
• Articulate and able to communicate complex ideas and information with clarity.

When an attorney hires an accountant to provide litigation support services, the communications and work can be protected by attorney-client privilege, as long as certain guidelines are followed, in particular keeping a paper trail of communications documenting that the interactions were truly related to a legal matter and not just routine accounting services. See the following article from the AICPA to read cases pertaining to accountants’ protection under the attorney-client privilege rules: www.aicpa.org/pubs/jofa/april97/segal.htm

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