Auditing, a tool that has been in existence since the Roman Empire, is about oversight. All areas in a corporation should be subject to oversight, including the legal department. And controlling legal spend, now more than ever, is a large component of a general counsel’s role. With the assistance of a qualified legal auditor, a company can put a process in place that can provide supervision along with cost savings.
What is a legal fee audit and how can you utilize the findings?
A legal fee audit is a review and analysis of attorney fees and costs designed to provide you with information necessary to make more informed payment decisions. An audit helps identify fees that are excessive, duplicative, or unnecessary.
Before selecting a legal auditor, it is important to have a good understanding of what you want to achieve with an audit. Below are some of the ways to use a legal audit:
-Review where your billing guidelines are weak in an effort to guide your outside counsel’s activity and ultimately keep your costs under control.
-Examine previously paid bills to determine whether or not they comply with existing guidelines in order to negotiate a reduction in billing.
-Leverage the legal audit findings and the legal auditor as an expert witness if you are in a situation where you cannot reach an agreement with the firm regarding the appropriateness of paid invoices.
-Evaluate how your litigation dollars were spent (voluminous bills can be organized so the client can determine the hours and fees associated with various projects) and what actually transpired during the litigation.
Once you know how you will utilize your legal audit, finding the right legal auditor for the position is vital. A legal auditing firm should have the following:
-Experienced attorneys. Attorneys have experience as both practicing attorneys and as legal auditors.
-Attorneys willing to customize the audit to meet the needs of the client.
-Auditors who are interested in assisting firms in complying with billing guidelines.
-Professionals who work in cooperation with the client and law firm and do not jeopardize the relationship between the client and the law firm.
-Auditors with an objective and fair methodology.
-If the case goes to trial, auditors who can act as expert witnesses or consultants.
-Attorneys who are able to perform allocations between covered and non-covered activities or issues.
-Auditors who are able to support a client in designing a plan on how to recover inappropriate activities or rates paid to law firms.
-Auditors with a powerful database and customizable audit tools that can efficiently review large numbers of invoices.
A legal audit can provide you with invaluable insights into your legal spend while at the same time provide oversight for the law firms. Some auditors base their operations on how much they can save a client and/or offer ROI predictions; however, a good legal auditor should work in the best interest of the client. This entails an objective review of the law firm, not a nickel-and-dime approach to the law firms. A reputable legal auditor will work with the law firms to assist them in learning how to comply with the client’s guidelines, thereby ultimately working to strengthen the relationships between the client and their law firms.