Attorneys who represent clients in civil litigation and criminal investigation matters oftentimes retain accounting experts to help them critically examine and analyze financial data, reconstruct financial transactions, prepare expert reports, provide expert testimony and rebut opposing experts’ reports and testimony. The main reasons for retaining an accounting expert are to assist the attorney in providing legal advice to his or her client and, as an expert witness, to assist the trier of fact to understand the evidence or to determine a fact in issue.

2008 National Conference on Fraud and Litigation Services

At this year’s AICPA National Conference on Fraud and Litigation Services, Les Fagen, Esq., senior partner with New York-based Paul, Weiss, Rifkind, Wharton & Garrison, LLP will focus on 10 best practices for building effective teamwork between lawyers and accounting expert witnesses. This article presents six of the 10 tips.

All members of the client’s professional team need to organize and combine their efforts. Although working as a team is critically important, the accounting expert witness must always remember that objectivity and integrity are the overarching ethical cornerstones in rendering expert witness services. They are the bedrock attributes of being independent and credible at deposition and in the courtroom. Fagen has formulated 10 best practices based on his fundamental principle that “expert witness engagements must be managed to preserve these values despite potential contrary pressures in the adversary system in litigation.”

Preserving independence and credibility requires the accounting expert witness to tell the truth at all times, form professional opinions consistent with the facts, apply principles and methods reliably and prepare adequately for deposition and trial testimony. If the accounting expert witness fails to demonstrate at all times the objectivity and integrity expected and required by the AICPA, the parties to the litigation and the trier of fact, then in a heartbeat he or she will lose the stellar professional reputation that he or she previously enjoyed.

Accounting expert witnesses have many professional credentials after their names and are known in the legal community and sought after for their particular practice areas and subject matter expertise. Fagen’s keynote presentation addresses many common pitfalls challenging expert witnesses in litigation that can undermine independence and credibility. The accounting expert witness who follows the 10 best practices can avoid the pitfalls affecting independence as well as other potential problems that could undermine credibility.

Best Practices on Building Effective Teamwork

There is no one “best practice” among the 10. Three of the 10 best practices relating to character are noteworthy to highlight because they reflect on CPAs’ good names and professional reputation:

1. Disclose all potential and actual conflicts;
2. Reveal the limits of our qualifications and subject matter
   expertise; and
3. Author your own report.

These three tips center on telling the truth and go to our core as human beings. The consequence to the accounting expert witnesses who fail to be candid about these three practices is devastating and will mark the beginning of the end of their career. The accounting expert witness who voluntarily makes full and complete disclosures about relationships, who does not overstate their credentials and whose written report is theirs rather than an attorney’s, demonstrates to all parties that they possess good character and practices with the core values of objectivity
and integrity.

Establishing and Maintaining Independence and Credibility

Testifying at deposition or trial as an accounting expert witness should not be taken for granted simply because an accountant is retained by counsel to testify. Indeed, Rule 702 of the Federal Rules of Evidence, related to Testimony by Experts, makes it clear that an expert witness may testify if:

1. The testimony is based on sufficient facts or data,
2. The testimony is the product of reliable principles and methods and
3. The witness has applied the principles and methods reliably to the facts of the case.

If the accounting expert’s report, deposition or trial testimony cannot be relied upon because facts or data are insufficient or the principles and methods are unreliable, then it is probable that opposing counsel will succeed in demonstrating that the accounting expert lacks independence and credibility. By opposing counsel making such a showing, the court will probably exclude the accountant from testifying.

Although accounting expert witnesses, unlike attorneys, are not advocates for their clients in litigation matters, the AICPA takes the position in Ethics Rule 101-3 that expert witness services create the appearance that a member is advocating or promoting a client’s position. As a result of this position, it is vitally important for the member who is retained as an accounting expert witness to comply with Ethics Rule 102 by maintaining objectivity and integrity and not subordinating his or her judgment to others. Otherwise, he or she will lack the independence and credibility that an accounting expert witness is required and expected to demonstrate at
all times.

The accounting expert witness will be independent and credible not only by considering sufficient facts or data and applying the principles and methods reliably but also by advocating only the accountant’s professional opinions rather than advocating the lawyer’s theory of the case and the
client’s position.

Conclusion

Best practices between lawyers and accounting expert witnesses begin by disclosing all potential and actual conflicts, preparing for trial and focusing, concentrating and telling the truth while testifying at trial. A client’s attorney has an opportunity usually for redirect examination to correct misstatements or misimpressions. And always remember that independence and credibility define us both inside and outside of the courtroom.

Walter Pagano, CPA/CFE, is Partner-in-Charge in the Litigation Consulting & Forensic Accounting Services Group, Tax Controversy Practice Leader in the New York City-based firm of Eisner LLP.