Services

In recent years, this term has come to represent a myriad of services under the umbrella of “investigative accounting”. Essentially, forensic accounting is the application of incisive accounting techniques in the critical evaluation of financial records. The distinction between “auditing” and “forensic accounting” is simple, although increasingly narrowed. Auditing is performed with the ultimate objective of measuring compliance with certain accounting standards. By contrast, forensic accounting is performed with the ultimate objective of achieving financial transparency, of identifying accounting problems and solving them.

Forensic accounting techniques can be used either independently or in conjunction with other financial analyses.

In a divorce case, for example, forensic accounting could be used to distinguish between separate and marital funds at the time of divorce. It could also be used in conjunction with a business valuation to substantiate that the financial information used in the appraisal had not been manipulated by the in- or business-owning spouse.

In an economic damage cases, on the other hand, forensic accounting could be used to evaluate the revenues and expenses that constitute lost profits. It could also be used in conjunction with a business valuation during instances when a business value is alleged to have been diminished or destroyed as a result of another party’s actions.

We have provided forensic accounting services in various situations, exemplified by the following:

• Divorce cases.
• Embezzlement and fraud claims.
• The determination of lost profits.
• The reconstruction of accounting records.
• The tracing of funds or assets.
• Shareholder disputes.
• To assist with the due diligence process.

See case study examples that illustrate situations where forensic accounting may be useful.

Business valuation is fundamentally an analysis of the cash flows that might accrue, in either a hypothetical or real-world situation, to the owner of a specific business interest. In recent years business valuation has risen in prominence due to regulatory and judicial requirements. Unfortunately, this increased demand for appraisal services has also created an environment where the term “business appraiser” can encompass anyone from a CPA who does one or two a year, when not otherwise doing taxes, to a practitioner who focuses exclusively on business valuation engagements.

While it is helpful to understand the myriad of business valuation credentials that currently exist, perhaps the best bellwether of such credentials is the level of difficulty necessary for their attainment. Ultimately, the selection of a qualified business appraiser should be made based on three determinants: credentials, business valuation experience, and experience in the specific type of appraisal being sought.
Business valuation can be used either independently or in conjunction with other financial analyses.
In a dissenting shareholder case, for example, a business valuation will often be required to determine the fair value of an outgoing shareholder’s interest in a business. Depending on the source and quality of the financial information used in the appraisal, forensic accounting may also be necessary to substantiate the financial information.

In an appraisal undertaken for gift and estate tax purposes, it is important that the appraiser understand the governance and assumptions that apply to such appraisals. Valuation is not an exact science, despite continuing efforts by practitioners and the profession to remove subjective elements. As such, it is important that an appraiser understand how certain considerations impact the components of a valuation and the discounts or premiums that may apply.

Business valuation remains an evolving area of financial analysis, which highlights the importance of engaging a business appraiser who is experienced and stays current on their business valuation body of knowledge.

We have provided business valuation services in various situations, exemplified by the following:

• Divorce cases.
• Shareholder disputes.
• Gift and estate tax planning.
• The determination of lost profits.
• Financial reporting.
• To assist with the due diligence process in mergers and acquisitions.
• Consulting.

See case study examples that illustrate situations where business valuation may be useful.

While forensic accounting and business valuation can be used in either litigious or non-litigious matters, calculations of economic damages are exclusively undertaken within the context of litigation. This area of financial analysis, sometimes referred to as determinations of “lost profits”, often require an understanding of how businesses operate and how they might be impaired. Calculations of economic damages are generally necessary in cases involving personal injury, wrongful termination, wrongful death, and contract disputes, although in some cases there need be no existing or prior relationship between the litigating parties in order for economic damages to have been incurred.

In economic damages cases it is imperative that a financial expert assess financial causation (the financial link between alleged damaging actions and claimed dollar-value damages), mitigation (the extent to which plaintiff might or should have reduced the claimed dollar-value damages), and mutual exclusivity (the extent to which plaintiff’s disparate claims for dollar-value damages avoid double-dipping or double-recovery).

Contract disputes, which comprise the majority of our economic damages cases, usually require that we assess the profits that might have been achieved by the plaintiff but for the alleged actions of the defendant. We will often work with experts in certain industries (such as real estate) or experts in other disciplines (such as economics) to complete our analyses.

We have calculated economic damages in various situations, exemplified by the following:

• Breach of contract.
• Business interruption.
• Shareholder disputes.
• Personal injury.
• Wrongful termination/death.
• Consulting.

See case study examples that illustrate situations where the calculation of economic damages may be useful.