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Birmingham Bar Association Bulletin Winter 2015

Forensic Accounting Basic examples as to how these professionals are used can be illustrated as follows: Example 1 – Use of forensic accountant to perform investigative accounting in bankruptcy proceedings. Lawyers for the unsecured creditors frequently hire a forensic accountant to look at transactions which preceded the date of bankruptcy fi ling. Th e forensic accountant will focus this part of the investigation on disbursements and other transactions by insiders and various outsiders for the purpose of determining whether any preferences might exist. Any such preferences would revert back to the bankrupt estate, thus enhancing the interests of the various unsecured creditors. Example 2 – Use of forensic accountant to perform business valuation in marital dissolutions. Both sides might hire their own separate business valuators or the parties might stipulate to use the same business valuator. Th is would be done for the purpose of determining the value of the family owned business in order to facilitate an equitable distribution of the marital estate. Example 3 – Use of forensic accountant to calculate damages resulting from torts. A forensic accountant might be hired by either the plaintiff or defense to quantify the economic damages, including any lost earnings suff ered from a personal injury claim arising from an automobile accident. Th is would be done in order to help determine the amount of damages that the court might award. Each of the above examples represents a diff erent area of expertise, requiring a separate set of skills, background, and training. Th erefore it is critical that the lawyer have a basic understanding of the diff erent types of specialties that are available, in order that the right professional is ultimately selected. Th is means that a certain level of due diligence is required of the attorney. At a minimum the attorney should carefully evaluate and clearly understand what is needed, and then ascertain that the forensic accountant selected has the background, training, experience, and capabilities to fi ll this need. Th is also includes making sure the person selected has the appropriate credentials when applicable, as well as looking into the person’s reputation. If the attorney intends to have the forensic accountant serve as an expert witness, he “...it is critical that the lawyer have a basic understanding of the diff erent types of specialties that are available, in order that the right professional is ultimately selected.” should also be comfortable that the person selected will make an eff ective witness. Th erefore, he should make it a point to ask the forensic accountant if he has testifi ed in the past, get references as to which attorneys he has testifi ed for, and check them out thoroughly. Finally, remember that when in doubt a simple consultation with another forensic accountant can go a long way. As for the benefi ts these professionals off er….this can range from the obvious “that it is critical to the outcome of the case” to some of the less than obvious. Some of these less than obvious benefi ts can result from the ability to do the following: • analyze voluminous and complex fi nancial transactions and data, and ultimately summarize them into a simpler and more concise format so that all the parties can have a better understanding of the facts; • assist legal counsel in discovery by formulating technical questions for deposition and interrogatories; • gain an understanding of the opposing expert’s position and educate legal counsel as to its relative merits and weaknesses; • assist legal counsel in preparing for trial by formulating questions for cross examination of the opposing side’s expert. Each of these benefi ts can bring with them a series of tangible and intangible results. Th ese results can range anywhere from providing the necessary preponder- Continued on page 32 Birmingham Bar Bulletin/ Winter 2015 17


Birmingham Bar Association Bulletin Winter 2015
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