Forensic accounting is one of the most in-demand expert witness disciplines. A forensic accountant is much more than fact witnesses such as a bookkeeper, the tax preparer, or even the CPA. The forensic accounting expert is a linguist of numbers and narratives.
Recent news brings us a portal into the secret world of Swiss bank accounts, reigniting the fire over income tax evasion, in the United States and Europe. Even confessions by defendants are not saving them from trial as government prosecutors wade through thousands of pages of discovery documents in an effort to quantify the true extent of the taxes or money owed.
Off shore accounts have long irked Americans as surely as invasions of privacy into banking irk the Swiss. In this high-stakes international cat-and-mouse game, the forensicaccountant may be the only person in the litigation setting who can interpret the financial transactions in search of the bottom line.
The general public and even the average lawyer might consider work of a forensic accountant expert witness to be tedious. There is an exquisite beauty to the truth of numbers that only this expert witness can bring forward. In a divorce case, it can be a battle of he-said versus she-said. In the money laundering prosecution, it is multiple witnesses, multiple platforms of communication, and a fight for the definition of commonly used words.
How does a forensic accountant play a role in these lawsuits? With an even pace and a step-by-step analysis, the forensic accountant leads us through the translation of the numbers. What if the opposing party said he did not have that much asset? Let the forensic accounting expert pre-mark the exhibits, with month-by-month bank statements showing every deposit and withdrawal, and debit card entries that are a road map of everywhere the party went.
There is a recent government prosecution wherein the expert forensic accountant presented a direct testimony that revolved around generally accepted accounting principles, statutes, and implementing regulations. Out of hundreds of improper transactions, the defense was able to pick a hole in three or four transactions having alternative and documented explanations. Some lawsuits can turn into a battleground for the best and most credible forensic accounting experts. It goes to show the importance of having an excellent accounting expert witness on your team.
My final note for the trial attorney is to ensure the expert is using proper methodology and then throw the expert witness some “creative” curve balls during trial preparation. Ask the forensic accounting to list the accounting discrepancies for you. Nail the opposing party to the law and to best business practices, but be vigilant for financial discrepancies that could provide useful data points. Even if the forensic accountant expert witness does not mention the discrepancies during his or her testimony, you might find the information useful for your cross-examination of the opposing party and witnesses.
By: Paloma Capanna, Esq.
Attorney at Law and Policy Analyst