When does a forensic accounting expert become necessary?
By Ron J. Anfuso (California)
In any case in which there is a small, closely held business that needs to be valued or when a cash flow analysis for purposes of support is essential, a forensic should be consulted. In addition, if there are cases in which clients have co-mingled accounts (i.e. separate property and community property in the same account), a tracing is required to preserve separate property assets. A forensic accountant will be necessary to perform this service.
When Should You Hire a Forensic Accountant to Serve as an Expert Witness?
While 90 to 95 percent of the cases where an accounting expert is involved will be resolved without the necessity of a trial, five to ten percent of them will go to trial. In these cases, your forensic accountant will need to qualify as an expert witness before the court.
The role of the expert witness should be as an advocate for the expert’s well-reasoned opinion. His or her function is NOT to be an advocate for your client, and the expert should not argue your case. This is the job of the attorney. However, the attorney should work closely with the expert beforehand to plan for testimony.
To ensure the expert is adequately prepared, the attorney should hire him or her prior to the close of discovery. This will enable the accountant to identify and then receive appropriate documents for his or her analysis and subsequent testimony.
How to Work with Your Forensic Accountant Expert Witness
The preferred method of communication with the expert should be phone calls and face-to-face meetings because written communication with the expert is discoverable. Therefore, suggest that note-taking be kept to a minimum during these meetings.
Also, do not detail tasks to be performed in an engagement letter or subsequent communication. In addition, avoid sending substantive information or findings in e-mails, and do not request drafts to be sent to you, since, as mentioned, these documents are then discoverable. Maintain heightened sensitivity toward drafts.
Once the expert has conducted his or her analysis, have the expert double check the work product for mistakes, flaws in logic and consistency with source data. This step avoids later implications that analysis should not be relied upon. Then meet with the expert to prepare for testimony.
During this meeting, discuss the content and order of questions to be asked. Although the expert should be well versed to answer the questions the attorneys on both sides of the case may ask, it is important that he or she not memorize responses before the testimony. Rather, the expert should think before answering each question, keeping aware of tactics designed to trip him or her up.
For example, the expert should be wary of questions that involve absolutes, such as “Has the expert identified ALL of the documents reviewed?” or “Are there ANY other facts the expert relied upon?”
Your Forensic Accountant’s In Court Strategy
Your expert witness should also beware of opposing attorneys’ attempts to develop an informal, but rapid, questioning style that may be designed to elicit answers from the expert without careful thought, and attorneys who jump from subject to subject. An opposing attorney might also try to ask the same question in different ways, attempting to get the expert to provide inconsistent answers.
The expert should listen carefully to each objection the attorney on his or her side makes. The attorney may be trying to alert the expert to a trick question or to factors that should be considered.
During direct examination testimony, it is okay for the attorney to lead an expert. However, the attorney should not coach answers.
The expert’s presentation should proceed as follows:
- Start with the conclusions.
- Then go into the details, such as the documents reviewed and how the analysis was derived.
- End with the conclusions.
The expert’s demeanor and tone of answers should be the same during both direct testimony and cross-examination. He or she should provide direct responses to each question, but only answer the questions asked and not volunteer extraneous information.
It should go without saying that the expert should always tell the truth. Those who are not truthful risk damaging their reputation — the most important attribute of an effective accountant expert witness.
Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA is a Los Angeles-based Forensic Accountant whose services include analysis of financial, accounting and tax aspects of marital dissolution matters. Mr. Anfuso has testified as an expert witness in family law and civil/commercial litigation matters more than 300 times. On several occasions, Mr. Anfuso has been appointed as a forensic accounting and valuation expert pursuant to California Evidence Code §730.
Reprint with permission