1. 2005 CTCW Annual Conference August 11, 2005
CSI by Numbers: Forensic Accounting in Litigation
Curtis J. Reynolds, CPA David C. McCormack, Esq. Peters & Associates, SC McCormack Law
2005 CTCW Annual Conference
August 11, 2005

2. Overview Role & Use of Accountants Types of Assignments (Cases)
When to Engage
Red Flags/Triggers
Documents Reviewed by Accountants
Case Study
Summary

3. Role & Use of Accountants
Expert
Calculation of damages
Evaluation of damages claim
Consultant
Recommendations for discovery
Deposition prep
Cross examination prep

4. Types of Assignments Personal Injury Wrongful Death
Wrongful Termination

5. Types of Assignments (Continued)
Business Valuation/Financial Review
Misrepresentation of Value/Income
Dissolution
Divorce
Financial Motive for Arson

6. Types of Assignments (Continued)
Breach of Contract/Contract Dispute
Non-Compete
Assisting Competitors
Failure to Perform
Malpractice/Negligence
Failure to Pay as Agreed
Overcharge for Products/Services

7. Types of Assignments (Continued)
Economic Losses Caused by Physical Damage
Fire
Water Damage
Faulty Construction
Faulty Equipment
Subrogation Pursuit and Defense

8. Types of Assignments (Continued)
Economic Losses Caused by Faulty Product
Product Recall
Food Contamination
Faulty Part or Manufacturing Component
Faulty Equipment

9. When to Engage Early On Late in the Game Pre-Litigation
Recommendations for Discovery Requests
Prep for Depositions
Late in the Game
After Receipt of Opposing Expert Report
Minimize Client Expense???

10. (Signals to trigger involvement of accountant)
Red Flags
(Signals to trigger involvement of accountant)
Damage calculation based on sales with no provision for saved expense
Damage calculation based on budgets/projections without consideration for historical performance
Damages claimed while business was historically operating at a loss
Lack of historical data (recently formed business, or damaged documents)
Insufficient supporting data
Large volume of supporting data/documents
Opposing expert (CPA, Economists, Voc Rehab) to opine on economic damages

11. Documents Reviewed by Accountants
Pleadings (Complaint, Interrogatories)
Depositions and Exhibits
Expert Reports
Contracts
Income Tax Returns (with supporting schedules)
Financial Statements (annual and/or monthly)
Quarterly Payroll Tax Returns, W-2s, W-3s
Payroll Registers
Sales Tax Returns, Customer Invoices, Sales Reports
Production Reports
Invoices for Purchases Made, Inventory Records
Credit Card Statements/Bank Statements

12. Case Study Background Property damage case
Plaintiff - chiropractic clinic
Defendant – public utility company
Complaint charges defendant with causing damage to underground pipe when installing buried telephone line
Claimed economic losses caused by water damage to building/contents

13. Case Study (Continued)
Claim
Cost to repair building $111,853
Loss of business profit ,374
Loss of goodwill 26,089
Cost of temporary relocation 35,000
Costs previously incurred 11,335
Damage to personal property 1,870
TOTAL CLAIMED DAMAGES $256,521

14. Case Study (Continued)
Accountant Retained
Complaint filed 11/15/02
Curt Reynolds retained on 3/1/04
Assignment:
review damages claim of plaintiff
prepare expert report
provide trial testimony

15. Case Study (Continued)
Role of Accountant
Review pleadings and deposition transcripts for pertinent facts
Analyze revenue trends using monthly productivity reports and tax returns
Determine variable cost ratios using tax returns
Research property values (real and personal)
Review and opine on expert reports
Prepare report and exhibits
Provide trial testimony

16. Case Study (Continued)
Role of Accountant
Cost to repair building
Loss of business profit
Loss of goodwill
Cost of temporary relocation
Costs previously incurred
Damage to personal property

17. Case Study (Continued)
Claim Results
Cost to repair building $111,853 $65,000
Loss of business profit ,374 0
Loss of goodwill 26,089 0
Cost of temporary relocation 35,000 0
Costs previously incurred 11,335 0
Damage to personal property 1,
TOTAL $256,521 $65,225

18. Comments & Questions