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Forensic Accounting: How to Keep Your Attorney From Turning Red-Faced

Posted by Rob Hernandez on Jun 5, 2019 9:25:00 AM

From the Desk of a Forensic Accountant

redfacedlawyer"Simplicity is the ultimate sophistication.” – Leonardo da Vinci

Since my 15 golf handicap will not allow me to play alongside Rory McIlroy on Sunday at The Masters, I have fallen in love with my life as a “simple” forensic accountant. Simplifying and effectively communicating results is one of the most rewarding aspects of a forensic accountant’s career. In a recent survey performed by the AICPA, over 100 attorneys overwhelming responded to the question, “What are the most frequent reasons why forensic accountants are ineffective?” as:

  1. Poor Oral Communication Skills

  2. Inability to Simplify Information

All joking aside to our “red-faced attorney” clients, attorneys represent some of our most valued and trusted clients. As forensic accountants, we possess the excellent traits of being analytical and detail-oriented by nature. Why else would we willingly choose a profession known as “bean counters?” However, even though these traits allow us to perform in-depth analyses, we, as the AICPA survey can attest, stereotypically struggle with simplifying our findings.

So, raise your hand if you are an attorney (normal-faced as opposed to red-faced) and you are having difficulties with your forensic accountant’s inability to simplify their findings? Here’s a quick list of pointers to help clarify our intuitive (yet sometimes misunderstood) analysis:

Who Will be Reading the Expert Report?

Know your audience. In forensic accounting, an expert report should be written with the goal in mind that anyone can pick up the report, read it, and understand the key issues.

Graphic Illustrations Are Your Friend!

Long data schedules are great for those of us that love details and think Microsoft products are cool. Furthermore, most people prefer to look at a table or graph as opposed to three detailed paragraphs of information explaining a calculation.

While working on a billion-dollar coal mine loss in Australia, we explained our theory and detailed findings to a team of attorneys for a few hours. We were met with scrunched eyebrows, blank stares, and confounded looks. We returned the next day with a couple of colorful graphs that helped illustrate our point. As a result, the attorneys completely understood our position within five minutes and we immediately moved on.

No Crystal Ball

If your forensic accountant states that their projection is exactly correct, find another forensic accountant. We do not have a crystal ball. Our projections are simply that – projections. In forensic accounting, our measurement is an estimate. Albeit an estimate that we feel is most accurate, but an estimate nonetheless.

For example, in an economic damages case, if your expert calculates a lost revenue amount that is nearly identical to the opposing expert, consider accepting the opposing expert’s revenue number and focus the reader’s attention on the variances in the expense analysis. This will significantly clarify the key issues at hand as the reader will not have to understand a different revenue projection methodology that results in an immaterial difference.

P(age) is Just a Number

I sometimes receive direction to keep a report limited to a certain number of pages. I disagree. The goal is to make the report an “easy read.” Graphs and tables may extend the actual length of the expert report, but they will most likely result in a report that is easier to understand…regardless of the additional pages.

Start Strong and Finish Stronger

Some readers will only read the first and last page of a report (you know who you are). A clean and concise executive summary will provide the reader with the key points of the report. In addition, the conclusion should be short and sweet.

Hopefully these tips will help you and your forensic accountant avoid the unnecessary curves and focus on the shortest route between two points – a straight line.

In the words of Mies van der Rohe, “less is more.”

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Topics: Investigative and Forensic Accounting

Rob Hernandez

Rob Hernandez

Robert has experience specializing in investigative accounting services to the insurance industry and legal profession, including one year of field work at Zurich North America Headquarters in Schaumburg, Illinois. His investigative accounting services have included commercial loss and value work, product liability, business interruption, extra expense, property damage, lost earnings, third party losses and stock valuations for various industries.

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