Serving as a forensic accounting expert in a family law case begins with setting the stage for the work to be performed for the attorney. One of the most important steps is developing the scope of the engagement. There are almost always limitations on the work based on budgets, deadlines, and available documentation. Therefore, it is important to evaluate what is available, what work is most critical and will be most valuable, and what problems the limitations might cause.
The typical divorce engagement will follow this general process:
1. Secure the engagement – Determine the nature of the engagement, the identities of the parties involved, and whether or not there are any conflicts of interest. Determine whether work can be completed in the time frame identified by the client, and whether the forensic accountant has the necessary expertise to complete the engagement.
2. Define the scope of the engagement – Agree on what is to be accomplished by the financial expert. This includes:
- Which documents will be analyzed
- What level of detail will be analyzed
- What issues are the focus
- Which investigative techniques will be used
- Which staff members will be performing the work
- What must be included in the final report
- Deadlines for interim reports and the final report
Often the complete scope of the work is not known up front. There are times when there are questions as to what documents will be obtained, and how detailed they will be. In cases like this, the forensic accountant’s work may take a phased approach, in which a small scope is contemplated initially, and additional work will be agreed to once more is known.
For example, it is not unusual for the financial expert to do an initial workup of the income tax returns and financial statements to determine whether there are any red flags of fraud or other irregularities. After that is completed, the expert is in a better position to make recommendations about additional work. The expert will often have a good feel for whether additional work will yield results that benefit the client. Since budgets are often a chief concern of clients, breaking the work down into pieces may be more beneficial than immediately agreeing to a large scope of work.
2. Determine fees and payment arrangements – Whether the engagement will be billed using hourly fees or a fixed fee, the fees and payment requirements should be outlined in the engagement letter. It may be preferable to address the engagement agreement to the attorney and have the attorney pay the fees. This will ensure that the expert’s work is protected as work product.
4. Background work – In the early stages of the engagement, the forensic accountant gathers background information to assist with the financial analysis. This portion of the engagement will include:
- Interviewing involved parties
- Discovery assistance
- Background research
5. Data analysis – This is the substantive work of the engagement, in which the financial analysis is completed.
6. Reporting – The financial expert provides a report, either oral or written. The formality of the report may vary, ranging from an oral debrief or email summary on one end, to a formal letter report with exhibits on the other end.
7. Testifying – Providing deposition and trial testimony.
