Some forensic accountants choose to specialise in Alternative Dispute Resolution (ADR) due to their familiarity with both finances and the legal system. Business litigation can be a very expensive and costly. Generally, opposing attorneys will fight vigorously for their clients. When forensic accountants are engaged as EXPERT WITNESSES in business litigation, such fighting can drive up the cost of the expert witnesses and drive down the understanding of the forensic accountant’s work and, therefore, the client’s satisfaction with the forensic accountant.
In a typical business litigation scenario, the opposing attorneys may fight against providing information which the forensic accountant has requested in order to calculate damages or to perform a business valuation. Depending on the amount of rancor between the parties and level of antagonistic determination between the attorneys.
There are times he may have to perform the damage calculation or business valuation without all the relevant information he believes is necessary. In the absence of such information, the forensic accountant may have to make reasonable assumptions regarding the missing information. If there are differing assumptions by each side’s expert witness, significant differences in damage calculation or business valuation amounts may result.
In such situations, the parties often may expend significant time and incur significant costs in using these forensic accounting experts. Especially when there are significant differences of opinion between the two expert witnesses, the experts’ fees and attorney fees can be even higher. Both parties also may come away with confusion and misunderstanding regarding how the relevant damage amount or business’s value was determined.
This is because they may only speak with the expert retained by their attorney and must rely upon the deposition and/or courtroom testimony of the opposing expert without being able to ask their own questions. The use of alternate dispute resolution – such as mediation, arbitration, and negotiation – not only can reduce the cost of traditional business litigation, but also can help eliminate the uncertainty that comes from leaving the resolution of the dispute up to the Courts (judge or jury).
Examples of disputes that are prime candidates for alternate dispute resolution includes:
• Business contract disputes
• Shareholder/partner disputes
• Employee termination disputes
• Insurance claims
• Royalty payment disputes
• Patent/trademark disputes
• Business merger and acquisition
• Local disputes,
• Global disputes,
How the role of the forensic accounting expert differ in Alternate Dispute Resolution (ADR)
• First, the forensic accounting expert can be jointly retained by both parties as opposed to by just one party in traditional business litigation.
• Next, because of the joint retention of the forensic accounting expert, both parties are more cooperative and better able to share all the necessary information needed by the forensic accounting expert. Thus, there is also usually less of a need to make assumptions.
• Finally, the expert witness report can be openly reviewed with both parties. Because this is a joint retention, the forensic accounting expert can be more open and informative with both parties and stand ready to fully answer either party’s questions. This helps to eliminate confusion and lack of understanding regarding the damage calculation or business valuation and the forensic accounting expert’s process.
• Additionally, the cost for the forensic accounting expert will be less, because only one expert is retained instead of two, and because the cost of depositions and/or courtroom testimony can be eliminated.
The Role of the Forensic Accountant In Mediation
A forensic accountant has a number of possible roles to play, which are discussed below.
Expert Accountant acting as a Mediator.
Accountants may play a role in a dispute by acting as a mediator. For example, disputes involving business valuations, application of technical accounting standards or which require business acumen and experience in a particular industry or sector may benefit from having a mediator with the requisite expertise in these areas.
The Forensic Accountant’s role in calculating damages and attending the Mediation.
In complex commercial disputes requiring an expert opinion on the quantum of damages, for example in a case whereby one party may have suffered a loss of profits following a breach of contract by another party, a forensic accountant may be retained as an independent expert to provide an independent assessment of the amount in dispute. In such a case the forensic accountant may be requested to prepare an expert report, attend a meeting of experts with an opposing expert, or advise their client on a range of their potential losses depending on a number of factors or assumptions. In mediation, the forensic accountant can provide a similar role, assisting a mediator in dealing with and understanding complex financial issues.
Forensic accountant role to serve as appointed receiver or monitor
Forensic accountant role as Consulting or testifying expert
Forensic accountant role as impartial neutral with specialized expertise
Forensic accountant role as Advisor to party during mediation
The philosophy behind Alternative Dispute Resolution is to ensure that parties involve resolve their dispute without anyone of them feel aggrieved. ADR is a good mechanism to resolve disputes among individual and organisation both local and international level. The presenter believes and suggests to us that all avenues available within ADR be explored fully before approaching the court. Even now that so many cases are queuing in the court without definite date of conclusion, is an issue that need immediate action by the government.
Ojeaburu Friday Msc, ACA, PhD (in view)
Dispute resolution is the process of resolving a dispute between parties. Dispute resolution is also often referred to as “conflict resolution.” There are a number of processes that can be used to resolve conflicts, claims, and disputes.
Therefore, ADR is the procedure for settling disputes without litigation, such as arbitration, mediation, or negotiation. It is also called external dispute resolution (EDR).
ADR procedures are usually less costly and more expeditious. They are increasingly being utilized in disputes that would otherwise result in litigation, including high-profile labour disputes, divorce actions, and personal injury claims.
One of the primary reasons parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other’s positions. ADR also allows the parties to come up with more creative solutions that a court may not be legally allowed to impose.
So the philosophy behind ADR is that it offers the parties an opportunity to avoid risks and reduces the likelihood of an unfavorable outcome. It gives the parties in the dispute the opportunity to consider the risks involved in litigation.
Dispute Resolution Processes
Generally, however, most dispute resolution processes are classified as facilitative, advisory or determinative or as ‘mixed’ or ‘blended’, and this article focuses on the more facilitative forms:
(a) Facilitative processes involve a third party, usually with no advisory or determinative role, providing assistance in managing the process of dispute resolution. These processes include mediation and facilitation.
(b) Advisory processes involve a third party who investigates the dispute and provides advice on the facts and possible outcomes. These procedures include investigation, case appraisal and dispute counselling.
(c) Determinative processes involve a third party investigating the dispute, which may include a formal hearing, and the making of a determination that is potentially enforceable. These processes include adjudication and arbitration and may be binding or non-binding.
While there are many reasons why facilitative processes have become more popular in recent years, one critical factor relates to the location of ADR services. Where ADR takes place within the courts or in a court-connected framework, such processes may be more likely to be advisory and be the subject of legal negotiation patterns. Arguably, one reason why facilitative mediation has grown so quickly in Australia is because it is often located outside the court system. While in Australia there has been substantial growth in facilitative ADR both within and outside the court system, in many disputes ADR must be used before court proceedings can be commenced. For example n some cases, court proceedings cannot be filed until a certificate has been lodged indicating that the parties have attended a mediation or in other situations parties must have made a ‘genuine effort’ or made ‘reasonable attempts’ to resolve the dispute before commencing proceedings. Within Australia, the most striking example of an extensive mandatory prelitigation ADR system exists in the family relationships area, and most disputants can expect to attend some form of mandatory ADR before being able to commence proceedings in a court.
Modes of Alternative Dispute Resolution (ADR)
Arbitration – This is a method involving one or more neutral third parties who are usually agreed upon by the disputing parties and their decision is final. The decision arrived at by arbitrator(s) is called an award and same is enforceable like a court judgment. The agreement to arbitrate must be in writing, signed, and the agreement is irrevocable except by agreement of the parties or by leave of court (Aduaka & Onnome, 2018). A process similar to an informal trial where an impartial third party hears each side of a dispute and issues a decision; the parties may agree to have the decision be binding or non-binding.
Mediation – This is essentially a non-binding dispute resolution mechanism involving a neutral and impartial third party who tries to help the disputing parties reach a mutually agreeable solution. The third party here is impartial, does not take decisions for the parties rather he helps them in identifying the issues and interests that need to be solved (Aduaka & Onnome, 2018). A collaborative process where a mediator works with the parties to come to a mutually agreeable solution. mediation a form of negotiation with a third-party catalyst who helps the conflicting parties negotiate when they cannot do so by themselves. Mediation is usually non-binding (Khan & Karim, 2017).
Conciliation-The process of conciliation is basically that of mediation. The only difference is that the neutral third party is usually an expert in the field or area of dispute in which he has being called upon to conciliate (Aduaka & Onnome , 2018). This is an ADR process where an independent third party, the conciliator, helps people in a dispute to identify the disputed issues, develop options, consider alternatives and try to reach an agreement. A conciliator may have professional expertise in the subject matter in dispute and will generally provide advice about the issues and options for resolution. However, a conciliator will not make a judgment or decision about the dispute. Conciliation may be voluntary, court ordered or required as part of a contract. It is often part of a court or government agency process.
Negotiation- Negotiation is a process whereby parties discuss and agree to terms or reach certain agreement without the aid or intervention of a third party. Negotiation basically involves some form of „give and take‟ from either parties or some form of compromise by the disputing parties. It is important to note that the law does not prohibit parties to a dispute from engaging in negotiation for the purpose of settling their dispute (Aduaka & Onnome , 2018). This form of ADR is often overlooked because of how obvious it is. In negotiation, there is no impartial third party to assist the parties in their negotiation, so the parties work together to come to a compromise.
Collaborative Law- This is a form of ADR that has grown in popularity, especially in respect of family disputes. In this process, all participants may decide to use a ‘collaborative’ process model whereby lawyers and all experts are trained in interest-based negotiation and are focused on the negotiation process with two-hour meetings and guidelines for gathering and exchanging information (collaborative participation agreements normally require the withdrawal of lawyers and others if the negotiation does not result in an agreed outcome, which means that they cannot be involved in any subsequent litigation). This is common in North America.
Ojeaburu Friday Msc, ACA, PhD (In view)
The mathematical theory of games was invented by John von Neumann and Oskar Morgenstern (1944). ‘Game theory is the science of rational decision making in interactive situations’ (Dixit & Skeath, 1999). ‘Game theory can be defined as the study of mathematical models of conflict and cooperation between intelligent rational-decision makers.’(Myerson,1991).
Both these definitions focus on the interactive component between the parties. At the heart there are the twin issues of conflict and cooperation. There is the assumption that these decision makers are rational and have specific objectives in mind which in a dispute is to reach a settlement.
Game theory, a mathematical model used in a variety of dispute contexts starts with the premise that the participants, while not knowing fully the position of the other party, are rational and want to achieve the best possible outcomes.
Levine (2019) stated despite the intensity of a dispute, both sides ultimately want to achieve the best possible outcome. Each party has to assume that the other party is rational even though he may not know exactly what the other party wants.
It is in this situation that the third party negotiator’s role becomes increasingly important to help move the parties along in the process of information exchange until they come closer to a common understanding as to what the other person wants.
Game theory provides a new language to think of human behaviour and of parties who are in conflict. Negotiation can be used in the family setting to alter the expectations and preferences of the parties. In game theory, one of the dominant models which has been used to explain the behaviour of individuals is the Nash Equilibrium. In game theory, the Nash equilibrium, named after the mathematician
John Forbes Nash Jr. is a proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy (Osborne & Rubinstein, 1994).
The usefulness of the Nash Equilibrium is that it comes to a point where the parties realize that they will need to settle in order to maximize their chance of a positive outcome. According to Levine (2019), the use of game theory is not meant to assume that within it is the solution to real life issues. What it offers is simply a model to understanding conflict situations and analyzing how parties can make decisions that result in positive outcomes.
Game theory shows win-win situation. It can apply in the business environment, to ensure every parties have the reason to smile.
Dixit, & Skeath. (1999). Games of strategy. 3
Levine, D. K.(2019). Game theory and the law.(alternative dispute resolution). Retrived on the 25th July, 2019 from the Kmnp Law Website www.Kmnplaw.Com.
Myerson, R. B. (1991). Game theory: Analysis of conflict. Harvard University Press, (1), vii–xi
Osborne, M. J., & Rubinstein, A. (1994). A course in game theory. Cambridge, MA: MIT.,14.
Ojeaburu Friday Msc, ACA, PhD (in view)