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Dispute Resolution Services McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

20-3 Introduction Disputes are inevitable in the business world. They can occur between individuals and groups in every area imaginable. The traditional means for resolving disputes range from all- out wars (between countries) to friendly negotiations. In many cases, however, disputes end up in the court system. In recent years, there has been a major trend toward using alternative dispute resolution (ADR) approaches to resolve disputes outside the court system. The traditional methods for ADR include mediation and arbitration.

20-4 Litigation Service: Forensic Accountant Roles in Dispute Resolution ADR neutral mediator or arbitrator Most states have no special licensing requirements for mediators and arbitrators. Dispute participant Accounting firms can become involved in disputes with their clients and employees. Also, sometimes partnership-agreement disputes arise between the firm’s partners. Expert consultant Forensic accountants can serve as expert consultants performing expert investigations, analyzing facts, and offering what-if analyses that can be used by one or more parties to a dispute. Expert witness Forensic accountants can be expert witnesses and give expert opinions in both ADR processes and in formal litigation.

20-5 Examples of Disputes Related to Litigation Services Bankruptcy disputes. Insurance claims. Fraud investigations. Financial and economic damages. Government grants and contracts. Intellectual property and technology assets. Antitrust and anticompetition issues. Merger, acquisition, and divestiture problems. General contract disputes.

20-6 Advantages of Alternative Dispute Resolution Versus Litigation ADR costs less than litigation ADR is private but litigation is public ADR mediation tends to preserve relationships but litigation tends to destroy them ADR tends to bring quicker resolution ADR permits the choice of decision maker Flexible remedies Fairness and expertise

20-7 Arbitration Binding (nonbinding) arbitration is a nonjudicial adversarial process in which one or more neutral persons (arbitrators) render a binding (nonbinding) decision to resolve a dispute among opposing parties. The arbitration process is normally governed by a set of rules that are agreed to in advance by the disputing parties. In almost all cases, arbitration is triggered by contractual provisions that require contract disputes to be resolved through arbitration. Contracts may require the involved parties to submit to administered arbitration. In cases of nonadministered arbitration, each of the two disputing parties typically selects one arbitrator, and these two selected arbitrators in turn select a third arbitrator.

20-8 Arbitration (continued) In some cases, courts may order court-annexed arbitration. International disputes, including disputes between countries, are sometimes arbitrated in the Permanent Court of Arbitration (PCA), also known as the Hague Tribunal, or under the rules of the International Chamber of Commerce Court of Arbitration. In general, decisions of arbitrators are legally binding and enforceable in court, and parties who sign contracts containing arbitration clauses generally waive their right to take disputes to court. Arbitrator decisions are enforceable not only within a given country but also commonly from one country to the next.

20-9 Mediation Mediation is an ADR technique in which a neutral mediator provides a structured process that helps those engaged in disputes to work out their differences among themselves. The mediator’s style can be either facilitative or evaluative. Mediation works best when both sides desire in advance to reach a negotiated solution. Because mediation involves a negotiated resolution, there is no mediator’s award or finding that can be enforced in a court. As with the case with arbitration, mediation can be either administered or nonadministered. Mediation sessions are quite different from arbitration sessions. Mediation does not always result in a resolution of the dispute.

20-10 Applications Of Alternative Dispute Resolution Labor Interest Arbitration Union Contract Arbitration Securities Arbitration Divorce Mediation ADR in Accounting Practice Accounting Services in ADR Cases Online Dispute Resolution

20-11 Accounting ADR Practice Accounting firms often specialize in ADR and litigation support services in the areas of evidence analysis, summarization, and interpretation. Accounting firms can also provide comprehensive ADR services. Some examples of specific services that accountants can provide in ADR cases follow: In corporate acquisitions, preparing for the buyer a notice of objection to the seller’s closing balance sheet. In corporate acquisitions, evaluating for the seller the buyer's notice of objection to the closing balance sheet. Suggesting mediation or arbitration procedures or ADR administrators to clients. Identifying, locating, and evaluating documents and information relevant to evaluating disputed issues.