Michael Fahlman 0000-00-00 00:00:00
Generally speaking, the average client buying professional services struggles with the cost. Professionals are not inexpensive, and clients know it. The “how much is it going to cost” question is a familiar one. In some instances, a budget or estimate is possible. However, many times it is not practical due to uncertainties. This is particularly true when businesses encounter trouble: trouble due to litigation, fraud, embezzlement, government inquiry, or other circumstances. During years of working with attorneys, it’s become clear that litigators understand this uncertainty well when dealing with litigation costs. Regarding forensic accountants and financial experts, it seems there is less clarity on the issue. We have worked on forensic and litigation engagements of many sizes; in some, costs have been managed very well, and in others, costs were more difficult to manage. This article provides insights and observations that may be helpful in managing costs, or perhaps more importantly, managing client expectations. While not all inclusive, the following are some important points of consideration when retaining forensic accountants and financial experts. Most forensic accounting and expert projects involve 3 important steps: i.) Define and determine the project scope; ii.) Preserve, collect and analyze data; and, iii.) Define, develop and present deliverables, findings and opinions. Scope & Success • Success - An important question to ask in advance of the project: what is success? The answer may not always be available; however, discussing and talking about it with your accounting or forensic expert up front can reduce costs. Experts' work can be more targeted and on point if they understand your goal. This will help limit scope creep and chasing down rabbit holes. • Scope - A common problem is a failure to have a mutual understanding of the project scope. The following items can have a significant impact on expert costs. To limit costs and manage client expectations, the scope should be initially considered, and re-evaluated throughout. • Time period to analyse • Parties of interest to investigate • Claims to investigate • Damages to calculate • E-Discovery to perform • Opinions to provide Data & Analysis • Data preservation - Costs to preserve are far less than the costs to recreate. Simply put, it's easier to load up preserved data than to reconstruct it. An investment in preservation can make a huge return if or when the data is needed at a later date. • Data volume - While significant amounts of data may be preserved, processing or analysing too much data is usually unnecessary and unproductive. In an effort to minimize cost, it is common that not all data is provided to an expert. Too often, the expert is not consulted on what data is provided, and consequently, critical data is not obtained or made available. It is similar to the Goldilocks story- not too little, not too much, just the right amount and the right data. Interacting early on with your expert will help strike a good balance between sufficient reliable data, cost and client expectations. • Native format - We have been provided countless Excel spread sheets in hard copy, with literally thousands of pieces of data. To conduct analysis on this data becomes difficult, if not impossible, in hard copy format. Converting to an electronic version is time consuming and costly. Providing financial records in native format is a quick and easy way to manage costs. We still get cases with Excel in hard copy, and come to find out the native format was available but simply not requested by counsel. • Transferring information - It is not uncommon to receive a box of haphazardly organized documents from an attorney's paralegal. It can take hours to sift through and organize the information. Conversely, some documents are sent electronically, organized by subject matter, date and source. Clearly, that makes it less time consuming for the expert, and consequently, helps reduce costs. In addition to organization, the timing of information is important. When multiple rounds of data will be provided, first transferring data that provides general case facts, timeline-related information, and "tells the story" documents, will greatly improve experts' overall efficiency. • Independent research - Some attorneys like a lot of independent research to support an opinion. This takes a fair bit of time, not just in obtaining and analysing the information, but particularly in explaining and tying the research into a written expert opinion. Reaching a common understanding with an expert prior to, and midstream, will help gauge the level of effort and cost related to creating deliverables containing significant independent or complex research. Deliverables & Opinions • Touch points - Attorneys are busy people. It is more common than you might think for an expert to have an initial discussion, receive documents, and then only hear from the attorney just before the report. This can work at times, although it's not the best. Having frequent touch points is one of the best ways to manage expert costs. Communication is key to managing costs and expectations. • Report vs. Presentation - If the matter is in a formal dispute setting, determining the type of disclosure will impact costs. A formal expert report will (or at least should) cost more than a disclosure. If the matter is not in a formal setting, an outline or PowerPoint presentation will allow the expert to convey the information in a more cost effective manner. This route is often a desirable route for other reasons, including privilege, confidentiality and simplicity for the audience. • Purpose - Explaining the purpose of an expert's deliverable will help them be more targeted with their work and preparation of the deliverable. As an example, if it is a presentation to a board of directors with the goal of providing recommendations, it will be quite brief compared to a Federal case expert report susceptible to a Daubert challenge. The use of an expert deliverable as part of settlement or other litigation strategy is not uncommon, and discussing it beforehand with the expert will likely manage costs. Following the above considerations will be helpful in increasing recovery and managing client expectations.
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