By Linda Cooke | Withum, AAML NJ Gold Sponsor
Discovery can be one of the most difficult, costly and time-consuming parts of marital litigation. For the purposes of this article, discovery is defined as gathering relevant financial documents, deposing fact witnesses including the parties, and the production of an expert report. The forensic accountants’ involvement in discovery can be as extensive or de minimis as required by counsel, but here is a look at what that role can include.
The accountant’s first step in the discovery process should be to obtain an understanding of the case, and the documents that are needed to complete the analyses required to negotiate or try the case. The process begins with an introductory conversation with counsel and an interview with the client. Next, the accountant would prepare an initial document request. Given the tenor of the case, the accountant may need to make an extensive request of all documents that could foreseeably be needed. However, ideally, the most cost-effective way to initiate discovery is to request basic documentation, such as tax returns, general ledgers, bank statements, and Case Information Statements. More extensive document requests can be presented as the need arises.
Under the proposed process, discovery is an iterative process. As the analysis of the basic records continues, the accountant determines what additional documents could be, or should be, available to support their opinion, or what documents or additional information is required to form a clear financial picture. For example, a review of the bank statements may reveal funds transferred to accounts that had not been disclosed, and/or deposits from third parties that require further explanation. Another example would be that the review of tax returns could provide information on assets owned or sold by the parties.
Therefore, as additional information is uncovered, the forensic accountant needs to issue follow-up discovery demands or conduct interviews of relevant individuals. If the information is not attainable through one of the parties, third parties may need to be subpoenaed or deposed to obtain the needed information. It is the accountant’s role to help counsel identify what these additional documents and discovery should include.
The accountant is to gather the necessary documents to support their work product and to provide the attorney with the information needed to mediate or litigate the matter. In this regard, the discovery process is vital in the outcome and unique in each matter; therefore, it is important that the forensic accountant stay attuned to the cost-benefit of discovery, maintain contact with counsel and the client, and stay apprised of all financial issues in the litigation.