February 2005 LOUISVILLE BAR BRIEFS

Feb 2005 • Volume 05, No. 2

What Every Lawyer Needs to Know

by Stanley I. Foodman

Because of the expansion of litigation in every area of our society, attorneys are employing certified public accountant (CPA) experts who specialize in forensic accounting in increasing numbers. Universities all over the world are offering courses in forensic accounting. In the United States, law enforcement and regulatory agencies are recruiting CPA accountants. Professional organizations such as the American Institute of Certified Public Accountants, the Association of Certified Fraud Examiners, and the Association of Certified Valuation Analysts are providing certification in specialized areas of forensic accounting. In other words, forensic accounting is today’s sexy buzzword.

This rush to employ accounting experts raises a number of questions. How does one locate a forensic accountant? What skills and training should a forensic accountant possess? How does one verify the bonafides of a forensic accountant? Perhaps most importantly, when in the process of litigation should a forensic accountant be employed?

Variety of skills

A forensic accountant is someone with a combination of skills. Beyond being a CPA, a forensic accountant has auditing and investigating capabilities that are ideal for detailing the complexity of litigation involving tax and finance. For example, a forensic accountant is extremely helpful in litigation support, particularly in cases that involve mountains of ledger sheets, bank statements, and receipts. A forensic accountant can take a seemingly needle-in-a-haystack pile of financial information and distill it into the important e1ements that need to be presented clear1y and concisely as courtroom testimony.

Look beyond the resume

Locating an appropriate forensic accountant is not necessarily easy. Not all accountants have the same resumes.

First, don’t believe all of the advertising you read. At minimum, locate a CPA with an investigative background and training. This is the best starting point-especially when it is necessary to ferret out information. Next, because a resume is no better than the character of the person who it purports to support, asking for and checking references is vital. Finally, after locating a forensic accountant and verifying his bonafides, take care when deciding the suitable moment during litigation to retain him. This decision may ultimately determine success or failure.

When seeking a forensic accountant to help with a case, look at personal characteristics beyond the resume. The forensic accountant should have a “can do” approach no matter how complex a case-a confidence driven by curiosity and persistence. In addition, a good forensic accountant must have a sense of creativity and organization so the financial material is distilled into understandable terms that won’t put a judge or jury to sleep. Finally, a forensic account should have the professional judgment and sense of discretion necessary in any litigation.

Get in early

For the maximum benefit, a forensic accountant should be retained early in any case where he or she is needed. Bringing the forensic accountant in early can lower expenses in a case by identifying potential problems before they snowball. Waiting to bring in a forensic accountant until after discovery can result in a complex case becoming even more complex. A forensic accountant needs to begin reviewing all documents as soon as possible to be the most effective in determining damages and/or helping with any settlement negotiations.

A different perspective

In my experience, a significant number of commercial and civil litigators feel that forensic accounting brings little to the process of production requests and depositions. Consequently they bring a forensic accountant into the process rather late. They probably do not realize that forensic accountants view information and sources of information from a different perspective than lawyers. Because rules of professional conduct governing forensic accountants do not permit advocacy, and their training is in a vocabulary completely different from that of attorneys, they dispassionately see and make informational connections often unseen by the attorney. In other words, capable forensic accountants are able to “think outside of the box.”

The earlier a forensic accountant joins the team during the process of litigating, the more value he or she adds to the attorney’s team and the client’s case.

Miami-based forensic account Stanley I. Foodman is a former auxiliary special agent for the Florida Department of Law Enforcement and has worked as a consultant to the Miami office of the U.S. Attorney. Foodman is a member of the Society of Certified Fraud Examiners and a member of the Supreme Court of Florida Circuit Committees on the Unlicensed Practice of Law.