Article 10: Benefits of Engaging a Certified Fraud Examiner Early
Welcome back to our series on working with a financial expert in business litigation. If you missed the last article that explored how to prepare the expert witness you’ve engaged for trial, and a few suggestions for cross-examining the opponent’s expert, you can read it here.
In litigation cases involving fraud, one of the most important steps is engaging an expert in financial forensics. Certified Fraud Examiners (CFE) have the training, knowledge and background in fraud that can make the difference in a successful claim. It is also crucial to engage an expert such as a CFE early in the litigation process. The decisions that are made at the outset of a fraud claim can have significant implications. A CFE can assist in these decisions, such as:
Determine scope and direction of the investigation
Fraud investigations can be far-reaching and expensive. In some cases, thousands of dollars can be spent investigating a few hundred dollars of fraud losses. A CFE can assist counsel and client in defining the scope and direction of the fraud investigation. Doing so keeps the focus on the most important aspects of the claim, and will likely result in a timelier and more cost-efficient investigation. In some cases, the CFE can help counsel determine if the case is significant enough to proceed.
Preservation of evidence
As soon as fraud is suspected, a copy of the company’s general ledger system should be copied and preserved. A general ledger system is an ever-changing record of a company’s financial transactions. In some accounting systems, transactions can be modified or even deleted with no record of such changes ever occurring. Therefore, evidence of fraud could be concealed or destroyed if a copy isn’t made as soon as possible. In addition, other sources of evidence such as invoices, bank statements and emails should also be preserved. A CFE can assist counsel and clients in identifying possible sources of evidence to preserve.
Assist in insurance claim
In many cases, a company will have insurance coverage for employee-related fraud. However, this coverage can have several hurdles to overcome to make a successful claim, including substantiating this claim. A CFE can assist a company in documenting the loss in a manner that will increase the likelihood of being paid by the insurance company.
Conclusion
As described above, engaging a CFE early in the process will increase the likelihood of success in a fraud claim. In addition to providing fraud expertise, a CFE can help narrow the scope of an investigation and potentially save expenses.
Coming up Next Time
Next time we will be highlighting each of the past ten articles and wrapping up this series on successfully working with the financial expert witness.
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Marty Mathias is a Shareholder of Capital Valuation Group, Inc., headquartered in Madison, WI. Capital Valuation Group has been helping business owners across the country understand, increase and unlock the value of their businesses for over 45 years through keynote speaking, valuation analysis, determining damages and providing expert witness testimony. Marty can be reached at mmathias@capvalgroup.com. Phone 608-257-2757