Forensic accountants quantify loss, trace funds and reconstruct records. Their value depends on being engaged early and scoped properly.
Engagement through counsel so that the work is directed at providing legal advice and, where litigation is anticipated, protected as work product.
Common assignments. Quantifying a defalcation; tracing funds through accounts; reconstructing incomplete records; economic damages calculations; solvency analysis for fraudulent transfer or preference issues; business valuation; and analysis of accounting treatment in a dispute over financial statements.
Data. The general ledger in native format, bank statements and images, the accounting system’s audit trail, and email. Providing summaries rather than underlying data produces conclusions that cannot withstand cross-examination.
Deliverables. An interim oral report is usually preferable to an early written one, because a written report circulated before the facts settle becomes a document that must be explained.
Testifying versus consulting roles should be decided at engagement, since converting a consultant into a witness exposes their working papers.
Cost control. Define the period, the accounts and the questions. Open-ended tracing engagements expand without limit.
Coordination with the company’s own accountants, whose independence may be affected if they investigate their own work.