In today’s complex business environment, disputes are inevitable. When they arise, parties seek ways to resolve them quickly, efficiently and cost-effectively. Litigating a commercial dispute in court can take years and cost businesses significant sums, potentially running into millions of dollars. As a result, many parties turn to alternative dispute resolution methods. One popular solution is appointing a neutral accountant to serve as an arbitrator for the dispute.
How Accounting Arbitrators Facilitate Fair Resolutions
An accounting arbitrator is a neutral, third-party expert who resolves financial disputes using specialized knowledge of Generally Accepted Accounting Principles (GAAP). Many parties choose to include dispute resolution provisions in purchase agreements, specifying that disputes such as earnout determinations, working capital disputes and EBITDA adjustments should be resolved by an accounting arbitrator. Unlike the traditional litigation model, an accounting arbitrator's process is less formal and more flexible, often leading to quicker and less costly resolution of the dispute between the parties.
The dispute resolution process typically follows the format given below:
- Initial Submissions: Parties prepare submissions outlining their respective positions and submit them to the accounting arbitrator.
- Rebuttal Submissions: Parties prepare rebuttal submissions addressing flaws in the opposing party’s position and submit them to the accounting arbitrator.
- Questions and Documentation Requests: The accounting arbitrator may submit questions and request additional documentation from the parties.
- Hearing: The accounting arbitrator may hold a hearing to ask questions directly to the parties and hear testimony.
- Decision: The accounting arbitrator prepares a written, binding decision.
Key Strategies for Presenting Your Case to an Accounting Arbitrator
Counsel for the disputing parties plays a critical role in communicating their client’s position to the accounting arbitrator. Preparing a clear, concise and well-organized submission is essential for helping the accounting arbitrator understand the key issues and evidence. To prepare a strong and compelling submission, consider the following tips:
- Understand the Accounting Issues and Consult an Expert: Engage an accounting expert to ensure a thorough understanding of the relevant accounting guidance and technical aspects of your case. Including an expert report from an accountant alongside your brief can be beneficial.
- Provide Detailed Evidence: An accounting arbitrator usually does not conduct independent investigations. Therefore, it is crucial to support your client’s position with comprehensive evidence, including all relevant financial documents, emails, contracts and other supporting materials.
- Avoid Legal Jargon: Remember that an accounting arbitrator is not a judge and is not there to resolve legal issues. Focus on the technical accounting issues at hand and avoid complex legal terminology.
Following these tips will ensure you present the strongest possible submission for your client.
Learn more about Kroll’s Accounting Expert Services including accounting arbitration, post-acquisition disputes, forensic accounting, commercial litigation support and more.
