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Saul Gordon
CPA, CFE, CIA, CA(SA)
Sunday, May 19th, 2024
Disputes Between Businesses
Breach of contract between independent businesses may result in lost revenues, lost profits, loss of repeat business and referrals, additional expenses incurred, etc. There may be a need to re-perform calculations in accordance with formulae in contracts (which formulae may be complex) to determine the accuracy of certain numbers presented such as amounts billed from one business to another. This may be for the purchase of goods or services or both. Discounts and credits may also need to be factored in. There may be calculations in connection with liquidated damages clauses in the contract. Forensic accountants may be retained to perform these kinds of calculations.
One business may not have paid another business for goods or services received. There may be issues of payment prioritization and defrauding of creditors accomplished through movement of assets and/or income out of the entity that owes the debt into related party entities and the movement of liabilities and/or expenses from related party entities into the entity that owes the debt. These movements may take place by manipulatively using the entity that owes the debt as well as other entities also owned and controlled by the same individual resulting in the 3rd party business not being paid. Forensic accountants may be tasked with determining the amounts paid (including no amounts paid) in connection with transactions between and among relevant related party entities and the individual who owns and controls them to assist in determining whether the entities were operating as separate business entities or not (“alter ego” of the common owner) as part of a fraud examination and so that the litigation attorney can seek a judgment against all involved entities so that the business that is owed the money can get paid.
There may be issues of patent infringement where one business has infringed on the patent(s) owned by another business and a lost profits calculation is needed.
There may have been misrepresentations in connection with the purchase of a business by another business (or individual), e.g., it may later be discovered that revenues were not as high as represented, not all liabilities were disclosed, etc.
Forensic accounting litigation support services can be used for assessment/analysis and quantification/valuation of losses/damages. Expert witness testimony may also be needed in these legal cases.