American Barrister®
American Barrister®

COMMON RECURRING PROBLEM

In an accounting-intensive case, the proper records must be carefully reviewed in order to decide whether to avoid or prepare for trial. This is often not done because the client doesn’t want to incur the expense of a forensic accountant for a case that will probably settle, and the law firm doesn’t have the accounting expertise to review and analyze the accounting records for useful information or to mount a competent challenge to those records. Even where a forensic accountant is engaged early, there is always a disconnect with trial counsel, who usually doesn't see the forensic accountant's work until the draft report is received, often requiring meetings between both professionals and requiring additional or alternative instructions from counsel. Not very efficient.

The problem is compounded in that most lawyers do not have the accounting and auditing skills to know which records to ask for in the first instance, or when they are being “sand-bagged”. As a result, Counsel usually does not know whether they have sought or obtained the best accounting records available, or which should be available, to prove their case or to disprove the adverse party’s claim or defense. Financial statements and tax returns rarely, if ever, provide sufficient admissible evidence relevant to the issues before the court, much less the degree of detail necessary to knowledgeably settle or competently try an accounting-centric case. The right questions must be asked in order to obtain the accounting records necessary for either purpose. Vague requests beget vague responses, which in turn beget vague, and usually unfavorable, interpretations at trial. Incompetent evidence is often admitted while competent evidence excluded because the court lacks sufficient understanding of the source(s) and concomitant reliability of the accounting records before it. Most often, no issue is raised at all because trial counsel does not have sufficient understanding of the accounting issues or the accounting records relied on or offered in evidence to formulate the issue and articulate a persuasive argument to the court.

Very often, when the client finally instructs the law firm to hire a forensic accountant, it is too late to get the full benefit of the accountant’s expertise, as the discovery period is closing or closed. The testifying expert is presented with inadequate accounting records which cannot be supplemented. Essential, existing, but now unavailable, accounting records are simply never sought, and the forensic accountant is instructed to “make do with what we have.” Without the right records, the forensic accountant cannot do his best work, and often cannot address all the factual issues counsel needs resolved before trial. Without a credible challenge, those issues are forfeited and the client is often faced with the choice of entering into an unfavorable settlement or risk an even more unfavorable outcome at trial.

The trial of an accounting-intensive case presents unique challenges, as none of the people in charge of the trial are accountants. The same problems that arose in discovery continue at trial. With few exceptions, most lawyers do not know what questions to ask of the witness, nor are they sure the answer was actually responsive. Often, the witness' answers contain gems for futher cross-examination which does not register with the lawyer, so that opportunities for impeachment are missed. Objections are not made due to trial counsel's lack of understanding of accounting and auditing procedures, and, if made, are opposed by another non-accountant lawyer and are ruled on erroneously by yet another non-accountant, the judge. Finally, the case is decided by a group of people who are tasked with deciding guilt, or liability and damages, requiring them to collectively agree on the net effect of accountinng principals and auditing procedures with which they struggle to wrap their heads around.

What is needed in the courtroom is not another lawyer speaking legalese or accountant speaking accounting, but someone who can explain to the lawyer and the court how the accounting records, or the lack thereof, impact the legal issues and fact questions before the court. This requires a lawyer fluent in accounting and an accountant fluent in legalese. In other words, an interpreter who can also explain it all to the lay jury.

Contact Us

Website: www.Barrister.law
eMail: American@Barrister.law

 

Robert J. Olejar, Esq. CPA, CFE

Phone: (201) 400-8351

 

Linda M. K. Olejar, Esq.
Phone: (201) 400-8354

 

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