Ron’s Corner
This is an article I never had planned to write. However, I felt compelled to do so due to the incompetent accounting I have recently witnessed.
Lately, I have been involved in cases in which the opposing attorneys hired inexperienced accountants. In some instances, accountants created a mess for the other attorneys’ clients. Here are some examples of what I encountered:
• An attorney who had little or no experience with forensic accountants, hired an inexperienced accountant to perform tracing. The attorney had no idea what questions to ask to define the parameters of the scope of work. So, this “green expert” performed more than 300 hours of tracing that had little benefit to the client’s case. Can you imagine the client’s expression when he received a $100,000 bill and reviewed an inadequate work product?
• An accountant who was not ABV certified was given the task to perform a business valuation. Somehow the accountant managed to determine a business that barely broke even was worth a huge sum of money. This accountant’s inept valuation ruined his credibility with the judge on the case.
• In a case involving cryptocurrency, the accountant stated the value of the crypto based on sale prices alone and ignored the purchase prices, thus grossly overstating the capital gains.
• A forensic accountant failed to ask for a retainer. In addition, he charged the client his maximum hourly rate when he had stated he would not.
If you have used a forensic accountant many times, this newsletter probably will only serve as a reminder. But for those of you who have rarely used a forensic accountant, I suggest you save this newsletter and review it the next time you need to find a forensic accountant.
Introduction
The accountant you hire must have a detailed knowledge of the principles enunciated in forensic accounting and family law cases. For this reason, it is a mistake to select an accountant who does not comprehend family law and related financial issues. So, let us take a look at when you should probably hire a forensic accountant and how to find one who will meet your needs.
When You Should Consider Hiring a Forensic Accountant
The forensic accountant you hire must have competency in the area(s) in which you need the assistance. The most frequent reasons for hiring a forensic accountant include when unreported or underreported income is an issue; one or both of the spouses is self-employed; one of the spouses has separate property claims; temporary and permanent spousal and child support are an issue; a determination of the marital lifestyle is required; accounting for reimbursements, tracing, allocation, apportionment and characterization of assets is needed; a valuation of a business interest is required; determination of business, executive or professional goodwill is needed; there has been a commingling of funds; there are reimbursement claims for post-separation maintenance of community assets (Epstein); the community has made payments on a separate property residence (Moore/Marsden); an apportionment of community business is necessary (Pereira/Van Camp); and a review of judgment for accuracy of findings is needed.
The accountant you choose should be tenacious, maintain confidentiality, have a professional attitude and appearance, and demonstrate excellent oral and written communication skills.
Finding a Forensic Accountant Who Will Meet Your Needs
You want to know how long the expert has been practicing and what percentage of their practice is dedicated to family law forensic accounting. Those who dedicate all or almost all to this specific field are a better choice.
Vitally important to your selection is to know how qualified they are to handle cases for the required services you need. For example, if you need an expert witness, you want to know how many times they have testified. The more experienced the accountant is in court, the greater the chance they will be an asset to your case.
You also want to question the accountant, contact several of the accountant’s referral sources, and determine whether the accountant:
• Returns calls within 24 hours.
• Keeps referring attorneys informed.
• Has an excellent record for meeting deadlines.
• Is not thought of as a “hired gun” and is considered an honest reliable witness by judges. (Find out how many times the accountant has been appointed by judges pursuant to Evidence Code §730).
• Is sensitive to clients’ needs to minimize fees.
• Always requires a retainer. (Question the accountant about fees. Make sure you are comfortable with the rate and how the accountant bills).
• Has attained the Accredited in Business Valuation (ABV) designation.
• Has repeatedly demonstrated that the accounting team will thrive under stressful and time-constricted circumstances.
• Has additional credentials {Certified in Financial Forensics (CFF), Certified Divorce Financial Analysts (CDFA), Fellow of the American Board of Forensic Accounting (FABFA)}.
• Provides quality reports. Request the accountant to share some sample reports with you (with the identifying information redacted, of course).
• Will be available enough to give your case the attention it needs. Some firms have their accountants take on too large of a caseload. Therefore, ask the potential accountant about turnaround time.
• Will be appearing for you in court every time or will be sending another one of the firm’s staff accountants to appear instead.
Working with a Forensic Accountant Expert Witness
The role of an expert witness should be as an advocate for the expert’s well-reasoned opinion. Their function is NOT to be an advocate for your client, and the accountant should not argue your case. This is your job. However, you and the accountant should work closely together beforehand to plan the testimony.
To ensure the expert witness is adequately prepared, you should hire them prior to the close of discovery. This will enable the accountant to identify and receive appropriate documents for their analysis and subsequent testimony and save your client money.