Building and maintaining a successful business is a complex and challenging process. 

From navigating partnerships and negotiating contracts to interacting with shareholders, customers, and vendors, there is always room for conflict to arise. 

When business disputes escalate beyond the point of negotiation, forensic accounting often plays a key role in uncovering the truth and ensuring a fair and accurate resolution. 

What is a business dispute?

A business dispute is a disagreement among parties involved in a business relationship that has the potential to cause damage to the business itself—both financially and in terms of brand reputation. 

A dispute may take place between business partners, between leadership and shareholders, between owners and employees, or between the company and its customers or vendors. 

Very often, these disputes require the help of a neutral third party to bring clarity to the situation and avoid escalation (which in most cases means costly litigation). If a business dispute involves accusations of financial misconduct, working with a forensic accountant is a must. 

Common types of business disputes

From right here in Austin to countless cities across the globe, there are 359 billion companies currently in operation—all of which are vulnerable to damages resulting from business disputes. While conflict may occur for any number of reasons, the following are some of the most common types of business disputes. 

Partnership disputes

Partnerships of any kind can be challenging, and business partnerships are no exception. Partnership disputes often happen when an individual chooses to leave the business (or is being forced out by another partner). This can result in arguments over how much compensation that individual deserves, or whether or not they have the right to take certain property with them. A partnership dispute may also involve a breach of fiduciary duty, such as mishandling company funds or assets. 

Employee disputes

Though a paid workforce is necessary for any commercial enterprise to thrive, a significant number of business disputes deal with problems involving employees and contracted workers. Among the most common employment disputes are disagreements over compensation and benefits, including a violation of severance agreements. Other disputes may involve allegations of financial misconduct or criminal activity on the part of a staff member, such as fraud or embezzlement cases. 

Customer disputes

Consumers may be the driving force behind business profitability, but they can also cause plenty of headaches if they feel like they have been wronged or mistreated. When customer grievances about product quality, misleading ads, service failures, or other issues go beyond the occasional complaint or comment on social media, they can become much larger problems that require you to take legal action to protect your business. 

Where does forensic accounting fit in? 

A forensic accountant is a certified professional accountant (CPA) that specializes in investigative accounting for the purpose of identifying financial irregularities and/or misconduct. 

Although not all business disputes will require forensic accounting services, they are critical for any case involving complex financial data, insurance claims, economic damages, or allegations of fraud or financial wrongdoing. 

For example, if an individual is accused during a partnership dispute of misappropriating company funds, a forensic accountant will examine all available data to determine whether or not those funds were used for personal gain.

If a business dispute results in litigation (resolution in court), working with a forensic accounting firm can provide valuable insight into a company’s financial history. In addition to analyzing all financial documents and evaluating complex calculations, the accounting team will present its findings in a way that non-financial persons can easily understand.

Benefits of working with a forensic accountant

When dealing with a business dispute, the best case scenario is that it can be resolved internally without the need for third-party assistance. However, because nearly every type of business dispute involves money, this is rarely the case. 

Forensic accountants use their carefully honed expertise to uncover financial irregularities and protect both the financial health of your company and its reputation. The benefits of hiring a forensic accounting firm include the following. 

Meticulous analysis of financial information

A forensic accounting team will perform a thorough analysis of all financial records and related business documents in support of dispute resolution. As part of this process, they will perform complex calculations—including damages calculations—to help determine the economic impact of the dispute. 

Assistance in the discovery process

Forensic accountants have a keen understanding of the relevant documents needed to form a clear picture of a company’s accounting practices. In many cases, they will collaborate with attorneys and legal teams to assist with the preparation and presentation of those documents in an effort to bring about a resolution to the business dispute. They will also be able to explain their findings in terms that all parties can easily understand. 

Expert witness testimony

When business dispute cases go to trial, forensic accountants are often asked to deliver expert witness testimony based on their specialized knowledge and experience. In this role, the trained CPA will appear in court to provide a detailed explanation of their findings, provide opinions on case-related financial matters, and answer questions from the judge, jury members, and opposing counsel. 

Investigative expertise to safeguard your business

Running a business will always come with a certain amount of risk. However, there are steps you can take to manage that risk and safeguard what you have worked so hard to build—beginning with making sure you have the proper accounting controls in place to protect against potential errors and fraud. 

When business disputes do happen, working with a forensic accounting firm early in the negotiation process is a smart move. Whether the dispute involves partners, shareholders, employees, or customers, a qualified forensic accountant will use a combination of accounting and investigative skills to ensure financial accountability. 

Mangold Anker Phillips, now Aprio, provides a full range of accounting services to Austin business clients, including management advisory services, assistance with acquisitions and dispositions, business valuation services, and litigation consulting. 

Call (512) 327-0909 for a free 30-minute consultation or email us at info@map-cpas.com to learn more about how we can help you .