Independent Accounting Expert - Coursework Example

Introduction An independent accounting expert is an individual who has some expert knowledge in a particular An independent accounting expert provides the court with opinions in a case based on his knowledge and experience in similar cases. The independent accounting expert also helps the court in interpretations of some factual information based on his expertise. The expert is mainly to provide information on a subject that the court does not have enough knowledge, skills, or experience. He provides the information to the court and not on behalf of his or her client. He or she is not allowed to act as an advocate when providing information on any subject. The expert could be retained by a person but his or her duty is not to that individual but to the court itself. In all the undertakings of the independent accounting expert in court, he or she should not do anything that is likely to impair his duty to the court or that could affect his or her independence in the issue due to a relationship. The independent accounting expert may be an individual possessing the required information or an independent accounting firm that provides expert information to the court. Some factors such as a case in court where the court lacks the skills, knowledge, and expertise required in determining the solution to a dispute leads to the acquisition of an expert in the field. Others include: the need for an expert witness, need for development of accounting issues, need for accounting opinions, etc. The need for an independent accounting expert by a court is not a new issue since many examples of cases have existed where the court have appointed independent accounting experts to provide the necessary information to the court for fair judgment. Before an independent accounting expert accepts an engagement, he or she should ensure that he or she has the required skills and expertise to provide some competent information on the dispute being addressed. In addition, the independent accounting expert should provide the information with maximum independence that cannot be affected by the existence of a relationship between him or her and one of the parties in the dispute. Dispute in Expert Engagement Cases Factors that have led to Disputes Most of the activities that organizations engage themselves in involve several subjects where each subject makes a contribution for the effective learning of the activity. The subjects in a case could be an individual against an organization, a department within the organization against the organization, the organization against an individual, etc. Disputes that require the engagement of an expert depend on the type of the dispute. An expert is required in a case where the discovery or interpretation of accounting matters is required. Here the expert hired should be a person who has enough knowledge in the field of accounting and has enough experience in the field of accounting. Also, in a case where development of accounting issues is necessary, an independent expert in necessary to provide the court with the necessary information that the court does not have enough experience to address the issue (Brian, 24). The need for some accounting opinions on the subject matter may call for the hiring of an expert who has the necessary accounting opinions that the court may be in need of. The hired expert should be an individual who can give the information that will help the court make the proper judgments without bias. The need for an expert to witness that the proceedings have followed the right procedures in determining the wrong doer in the dispute is another issue that may call for the need of an expert. A client may sue an accounting firm if the firm has issued some erroneous financial statements. This is a malpractice that the court may require an expert to give information on the financial statements. The issue in the court could involve a tax malpractice whereby an individual may have sued on basis of being overtaxed. The expert here might decide to start his examination on the tax returns of the subject (Brian, 32). In all cases involving accounting, the expert should first go over the documents and it is the work of the expert to determine the particular document to start with. Issues Involvement of Accounting Experts Invotex has been involved in many expertise cases and have represented individual clients, organizations, and the court in matters pertaining to accounting. One case involved a regional CPA firm that for several years had audited the financial statements of a healthcare organization. In the case, the healthcare organization had been declared bankrupt after over one year since the last date of the audited balance sheet. Bankruptcy trustee experts determined that the CPA firm had gone against the accepted auditing standards by not informing the board of directors of the organization about the transactions that caused the bankruptcy in the healthcare organization. The CPA firm also ought to have provided some information in its opinion report regarding the capacity of the organization to successfully continue with its operations (Roman, 89). In representing a financial executive of an institution to consult with a legal counsel, the financial institution had been accused of providing some misleading information in the financial statements. Complex accounting issues arose that involved investment impairments, derivatives, etc (Mark, 1). Another issue involving a major insurer having filed a case against two accounting firms over accounting malpractices has been held. The insurance company needed to be paid damages worth over one hundred millions by the accounting firms. The insurance company used to offer bonds on the basis of a company’s audited financial statements. The insurance company had decided to take over management of the company due to the high level of claims. The company’s books of records revealed that the company had overstated its available assets and an understatement of the company’s liabilities. In the case of United States versus Bell, Bell had requested Baker and McKenzie law firm to provide some legal advice on its transfer exposures and pricing practices. In a bid to try and come up with a good report, the law firm hired an accounting firm to provide some information on accounting. The accounting firm needed some information from both the law firm and the tax payer that the two provided. A report was produced by the accounting firm that was used by the court in the case. In solving the dispute, the attorney-client privilege issue was addressed where it was held that the involvement of some experts by a law firm to get some information regarding the issue of tax is not subject to discovery (Ray, & Zect, 436). Actions Taken before Acceptance of an Engagement Engagements issues are very important in determining whether the information that will be provided will be relevant and whether it will assist the court of law in making the right decision. Scope of Expertise As it has been noted before, the work of an independent accounting expert is to provide the court with the relevant information concerning an issue. In regard, the independent accounting expertise should posses the essential skills that are necessary and the will assist the court in making competent decisions over the issue in hand. The court should therefore be very careful in choosing the independent accounting expert so that the independent accounting expert chosen has the required skills, knowledge, and expertise to provide the4 information required or carry out some required assignment. Before an individual accepts his engagement in an issue involving expertise, he or she should be very keen to ensure that he or she has the necessary skills and expertise required to provide the information requirements of the court (Michael, 46). The bankruptcy trustee in the case involving the CPA firm and healthcare organization must have had the necessary expertise on the auditing standards so as to provide the facts on the issue. This was the necessary information that the required in determining the solution to the dispute. The independent accounting expert should also ensure that he or she has provided the information that he or she will provide information only on his or her field of expertise. If a question falls outside the independent accounting expert’s scope of expertise, he or she should inform the court with immediate effect that the question is outside his or her scope of expertise. Independence If the independent accounting expert is provided some assignment concerning information that touches on some persons where there was a relationship before between the independent accounting expert and the party, the independent accounting expert’s decision is likely to be affected by the relationship. Also, if there is a current relationship or a relationship is likely to occur between the independent accounting expert and the party, the independent accounting expert decision is again likely to be affected by this relationship. The best independent accounting expert is one who is independent as in he or she cannot be affected by a relationship between him or her and some party just because of a relationship. The expertise standards should come first and the independent accounting expert should work to exercise his or her expertise and not in favour of anyone regardless of the relationship (Peter, 25). The aim of the court in hiring the expert is to provide the necessary information and the information that the expert should provide should help the court and the expert in achieving the overall objective of the exercise. Before an independent accounting expert accepts an engagement, he or she should first of all investigate if there are any doubts that he or she won’t carry the assignments offered properly. Any perceptions concerning his or her fairness in attending to the assignments given should first be settled and he or she should convince the court that he or she is quite independent and cannot violate the standard rules in dealing with a case just because of a relationship (Niamh, 333). Failure to settle any doubts, the independent accounting expert should not accept the engagement in the issue. If there is a conflict of interest in an issue, the independent accounting expert is not allowed to take any information that could at the end of the day affect his or her independence. However, an independent accounting expert is allowed to accept an assignment if he or she provides full information regarding the relationship between him or her and the party where a conflict of interest occurs. The disclosure should be made in writing and for the independent accounting expert to accept the appointment; the parties who are touched by the conflict of interest must have allowed the expert to make the disclosure and also must have accepted the appointment of the independent accounting expert. If the opposing parties agree on the appointment of an independent accounting expert regardless of the existence of a conflict of interest, the independent accounting expert may accept the appointment (Tracy, 131). The independent accounting expert should take a few measures to determine if a conflict of interest exists or is likely to arise in future (Janos, 83). These measures may include: look for any evidence that touches on his or her involvement with the opposing and existing parties, existence of related dictatorships, directorships, or interests, in case of several offices around the world, all the offices should be investigated for similar involvements that may cause conflict, and search if the independent accounting expert has been involved in similar actions. In the case of United States versus Bell, if a relationship between the taxpayer and accounting firm existed, the expert accounting firm should avoid offering the expertise information on behalf of the taxpayer since this could lead to bias. Not unless the US government had allowed the accounting firm to offer the information, the accounting firm has no right to do so. Conclusion An independent accounting expert is very important to the courts as he or she helps the court in making fair judgments on disputes involving accounting. These are disputes which if the court alone was allowed to carry out the investigations, their result could be biased not because the court wished to be biased but because it lacks the skills, knowledge and experience. The courts solve many dispute cases that come as a result of some factors. If the court needs some accounting expert witness, it may be forced to hire an expert to assume the position of a witness on behalf of the court. Another factor that may lead to the acquiring of an independent accounting expert by the court is the need for the development of some accounting issues. The expert hired should be an individual who is experienced in the field. The need for accounting opinions by a court may lead to the acquisition of an independent accounting expert. Before the individual accepts an engagement, there are some actions that he or she is required to take. First of all, since the work of the expert is to provide the court with expertise information, the independent accounting expert should posses the essential skills that are necessary and the will assist the court in making competent decisions over the issue in hand. If requested to provide the court with some information, he or she should ensure that he or she posses the necessary information that pertains to the dispute. If the independent accounting expert is required to provide some information that is outside his or her field of expertise, he or she should let the court know about it immediately. If in the event of providing the required information a conflict of interest is likely to occur, the independent accounting expert should avoid presenting this information. Conflicts may arise as a result a current relationship between the independent accounting expert and one of the parties in the dispute, a previous relationship between the independent accounting expert and one of the parties in the relationship, or a chance that a relationship is likely to arise between the independent accounting expert and one of the parties in the future. Also, if the firm that is providing the expert information has several branches all over the world, the existence of a relationship between the independent accounting expert and any of the parties in any of the branches should be investigated. References Brian, C. (2001). An Accounting Expert Role in a business combination. Jones & Barlet, 11-47. Janos, B. (2003). Managing Conflict of Interest in Public Service. New York: Macmillan publishers, 83. Mark, D. C. (1999). Expert in Litigation and Arbitration. Retrieved from http://www.bharatbook.com/Market-Research-Reports/Expert-in-Litigation-and-Arbitration.html on 10-August-2009. Michael, J.W. (2002). Forensic Accounting. Princeton: Princeton University Press, 45-47. Michael, S. (2002). Expert Witnessing in Forensic Accounting. Ireland: Michael & Co. Publishers, 2-6. Niamh, B. (2002). Accounting Expertise in litigation and Dispute Resolution. Dublin: Dublin University College, 333. Peter, B. F. (2007). Litigation Services Handbook. Oxford: Oxford University Press, 24-26. Ray, W & Zect, T. (2007). Accountants Handbook. Princeton: John Wiley & Sons, 436-437. Roman, L. W. (2001). The Role of the Financial Expert. New York: Irwin& John, 89-92. Tracy, L. C. (2007). Expert Witness Testimony: Communicating to the Court. Tuoro: Touro College Publishers, 131-133. Read More