Using CPAs in Fraud & Embezzlement Cases

by Jim Marasco , CPA, CFE, CIA
Director, Corporate Services
StoneBridge Business Partners

Reprinted with permission from Fraud Matters Newsletter of CPA America .

A qualified CPA with litigation experience can be a great asset to your fraud case. In searching for help, there are some important factors an attorney should consider.

Finding a Qualified Candidate

Fraud cases demand using professionals who have knowledge of the evidentiary requirements and protocol to be followed. Not all CPA’s are qualified for this type of assignment.

Firm’s that purport to provide litigation and forensic services should have qualified members for these types of cases. Advanced certifications such as the CFE (Certified Fraud Examiner) reinforce a candidate’s training and experience.

Once a firm and candidate are found, inquire about other attorneys who have engaged their services previously. Request a copy of their updated Curriculum Vitae (CV) and hourly rates and interview them in person. Additionally, you should consider the following:

• Do you think they would make a good witness if the case proceeds to litigation? 
• Would they be able to take a complicated case and/or concept and simplify it appropriately without diminishing the case/facts? 
• Will they be easily rattled by opposing counsel? 
• Are their qualifications strong enough to withstand scrutiny?

Most fraud and embezzlement cases don’t end up requiring expert witness depositions or testimony. Therefore, in addition to reviewing the CPA’s CV, inquire about similar cases in which they have been engaged, and how they propose to approach this one. What specific services did they provide? Can they discuss the work product delivered and the outcomes?

Engaging the Expert

Once you feel confident with your candidate, request an engagement letter formalizing the contractual services that will be offered. Ensure that the letter clearly outlines the services and that fees are not contingent based on the outcomes. In some cases, the CPA may require a retainer. It’s best for the attorney to directly engage the financial expert versus a client, as to protect the attorney work product privilege. 

At this point in the engagement, it’s best to have a clear understanding of the expectations. An estimate of fees or budgeted hours should be discussed before commencing. The final work product should also be discussed. Whether it’s a written expert report or summary of findings, it’s better to decide upfront as to what will be expected and the time frame to work within.

Preparing the Case

The CPA/fraud examiner should be able to interview individuals, disseminate the information and present the facts in a systematic and orderly fashion. The financial expert should be able to help bolster your case in a variety of ways, depending on the specifics of your case. For example:

 
Most skilled fraud examiners excel in interviewing alleged perpetrators. If possible, allow your expert to interview those involved.

The accountant and attorney may have to work closely in obtaining the necessary documentation. Subpoenas may have to be issued for records not currently available. Once the records are collected and the interviews have been conducted, your expert should start the analysis part of the engagement and should be able to work independently. They should be able to document what happened, identify who is responsible, quantify the loss exposure, determine the period affected, and substantiate all results.

At the conclusion of the engagement, a written report should be issued in the required litigation-style format. The report should include a factual summary of the results of your expert’s work and it should be free of opinions and unsubstantiated theories.

If your case proceeds to litigation, your CPA or fraud examiner can prove to be helpful. In a criminal prosecution, your expert may be called on to support the prosecutor’s case. For civil matters, the expert report and related records may be used in seeking restitution.  
Retaining a qualified and experienced CPA/fraud examiner will increase your chances of success in a fraud or embezzlement case. 

James I. Marasco, CPA/CFF, CFE, CIA
Jim is a partner at EFP Rotenberg. He brings more than 18 years of public accounting and auditing experience. He is a full-time management consultant and travels extensively throughout the country while leading StoneBridge Business Partners (an EFP Rotenberg affiliate company). Read more about Jim . Article republished with the permission of CPAmerica.