May 20, 2019 Articles

The Role of a Consulting Expert in Financial Litigation

The forensic accounting capabilities of consulting experts set them apart from other accounting and finance professionals.

By Michael Braverman and Chris Ekimoff

When most attorneys consider using an expert to testify at trial, they are thinking about someone who can testify with specialized knowledge about key issues in the case. However, litigators in the know recognize that experts can be useful for so much more. Enter the litigation consulting expert.

Litigation Consulting Experts: Beyond Testifying Experts

Litigation consulting experts have the same specialized skills as testifying experts (e.g., accounting and finance), but they work behind the scenes advising counsel and providing case-relevant guidance. These situations may include, for example, assessing the appropriateness of an entity’s accounting methods, whether there are indications that earnings may have been manipulated to achieve or exceed preannounced targets, or if there is sufficient evidence to indicate that assets have been misappropriated. In short, a consulting expert can help counsel and their clients evaluate the strengths and weaknesses of their positions and can be an adviser from the prelitigation phase up through trial, all while maintaining privilege.

We have all heard stories of lawsuits against large companies involving a C-suite executive alleged to have “cooked the books,” or inappropriately adjusted financial results to improve the company’s perception in the market. Many times, top executives come under fire for their alleged (1) active role in adjusting financial results or (2) lack of attention in correcting any inappropriate activities of their subordinates. A consulting expert can review the accounting and financial records of the company, emails, and other information to assess such claims and, if needed, help identify who may have known about the inappropriate adjustments and how to present those facts to a trier of fact. For the CEO and chief financial officer who must certify the reasonableness of the company’s financial information under section 302 of the Sarbanes-Oxley Act, “Corporate Responsibility for Financial Reports,” the potential consequences associated with a known misstatement can be significant, including potential incarceration.

The forensic accounting capabilities of consulting experts set them apart from other accounting and finance professionals. When it comes to investigating potential Ponzi schemes or other financial crimes, forensic accountants have a distinct ability to review and investigate a situation and unravel all of the pieces and parts to show a complete picture of what took place.

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