This Insights was contributed by Richard Pasquantonio, CPA/CFF, CFE, CDFA (NC License Number 33577), an associate at Adam Shay CPA, PLLC.
If you are considering civil litigation as a means of resolving a business or personal dispute and there are complicated financial issues preventing the parties from reaching a resolution, then you should consider discussing with your attorney if a CPA certified in financial forensics (CFF) might provide clarity to your case.
What is a CFF?
The American Institute of Certified Public Accountants (AICPA) established the CFF credential in 2008 for CPAs who specialize in forensic accounting. The CFF credential is granted exclusively to CPAs who demonstrate considerable expertise in forensic accounting through their knowledge, skills and experience. The CFF encompasses fundamental and specialized forensic accounting skills that CPA practitioners apply in a variety of service areas, including: bankruptcy; electronic data analysis; family law; valuations; fraud prevention, detection, and response; financial statement misrepresentation; and damages calculations.
Roles of a CFF
- Hold a valid and unrevoked CPA license.
- Pass the CFF examination.
- Have a minimum of 1,000 hours of business experience in forensic accounting within the five-year period preceding the date of the CFF application.
- Have 75 hours of forensic accounting related continuing professional education (CPE) within the five-year period preceding the date of the CFF application.
A CFF can serve in a number of roles, the most common two being as an expert witness or an expert consultant.
An expert witness is formally designated by either party to a dispute to render an opinion before the court to assist the judge to understand the evidence or to determine a fact at issue. As a result, an expert witness’s litigation-related work may be required to be produced to the opposing party through a process called discovery.
Conversely, an expert consultant is not formally designated by either party. Instead, an expert consultant is retained by either party to advise about facts, issues, strategies or other matters relevant to litigation. Generally, the expert consultant’s work is protected from discovery by the attorney work product doctrine, an extension of the attorney client privilege.
How Can a CFF Drive Value During a Legal Dispute?
Generally, the CFF adds value by providing timely and accurate information to the litigation team. This allows the litigation team to better assess risk, make more informed decisions, and adopt a legal strategy that best suits the client's risk tolerance and overall objectives. Litigation is costly and the outcome is uncertain. The stronger your litigation team, the greater likelihood you will be satisfied with the outcome. As a part of your litigation team, a CFF has three primary functions:
- Gather - To assist clients and counsel in gathering and organizing relevant and reliable financial documents.
- Analyze - To analyze the financial information gathered for the purpose of rendering an opinion or providing consulting.
- Report - To communicate his or findings to the client, their counsel or to the court.
The Gathering Phase leverages the CFF’s financial knowledge, education and experience to more effectively and efficiently manage the discovery process during litigation. A CFF can limit the number and extent of document requests by narrowing the scope of the request, thereby reducing the overall cost of the litigation.
During the Analysis Phase, a CFF reviews the financial documents made available through discovery. A CFF can determine if relevant financial information has been omitted that is material to the client's case, thereby potentially expanding the scope of the litigation and consequently the potential damages awarded.
Finally, a CFF can provide value during the reporting phase by summarizing his or her analysis for mediation or trial. After a CFF has reduced the analysis to a report, it will provide the litigant and his or her team with a clear understanding of the financial issues, the known facts associated with each financial issue, the methodologies employed by the CFF in arriving at his or her opinions, and any limitations regarding those opinions. The litigation team is thereby well-positioned to either negotiate a fair and equitable settlement during mediation or prepare for trial with a clearer understanding of the risks and rewards associated with the litigation.
My goal today was to explain for you what a CFF is and to show you how their services can provide value during litigation.
Richard Pasquantonio, CPA/CFF, CFE, CDFA (NC License Number 33577), is an associate at Adam Shay CPA, PLLC. He focuses on forensic accounting, fraud prevention and detection, and tax controversy resolution. Richard is also an AICPA CFF Champion. The purpose of the CFF Champion program is to inform the professional community about the vital role of forensic accounting professionals, the knowledge required to become a CFF, and the benefits of the CFF credential. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at 910-256-3456.
Adam Shay, CPA (NC License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at 910-256-3456.