By Rakis Christoforou BBA, CPA/ABV/CFF, MCSI, CGMA, ACFE
The forensic accountant, acting as an expert witness, must remain objective and consistent, very similar to an auditor performing audit work. He will most probably be asked to testify at court. Therefore, he must apply facts fairly and impartially and resist pressure to support client position, unless it is appropriately supported.
He must communicate his findings in a positive manner and avoid negative attitude towards the opposing counsel and/or the court.
One important issue that he must always bear in mind is that his work product could be discoverable since he is now acting as an expert witness and not just as a consultant. Therefore, he should support his work product with strong evidential matter.
FORENSIC ACCOUNTANT'S SKILLS
Forensic accountants acting as financial expert witnesses are often expected to have in-depth knowledge in the following areas:
- Financial Accounting Principles and Auditing Standards,
- Cost Accounting,
- Business Valuation Approaches and Methods,
- Corporate Law,
- Statistics and Regression Analysis,
- Present Value Calculations,
- Marketing Analysis,
- Macro and Micro Economics,
- Presentation skills,
- Educational skills.
Note that other financial experts may be needed in a particular case besides the Forensic Accountant such as an expert Quantity Surveyor, a Doctor in cases of personal injury or death and/or other technical or engineering expert.
In order for someone to qualify as an expert witness in a trial, he must be in a position to present scientific, technical or other specialised knowledge to help the court understand the evidence or determine a fact in issue. His testimony must be based upon sufficient facts or data, must be the product of reliable principles and methods that were reliably applied to the facts of the case. According to the Daubert tests in order to determine the reliability of a particular expert’s scientific theory or technique, the following should be answered positively:
- Has the Theory or Technique been tested before?
- Has the Theory or Technique been subject to peer review?
- Are there established standards to control the use of the Theory or Technique?
- Has the Theory or Technique generally been accepted?
Financial expert witnesses are not supposed to create new theories and techniques to support a case but to apply existing theories and techniques that have been used, tested and generally accepted in the business community.
QUALITIES OF FINANCIAL FORENSIC EXPERT WITNESSES
There are certain qualities that generally must be possessed by expert witnesses. They must be:
Professional with relevant qualifications and,
Experts in the subject matter.
I came up with the acronym HOPE to help me remember the above qualities.
Expert witnesses must remember that they must remain independent, they are not the client’s advocate or lawyer but advocates for their own work product and report. Having said that, financial expert witnesses, in order to properly prepare their report, must work closely with lawyers to avoid other legal issues that may be raised through their report.
Expert witnesses are often challenged or even intimidated by the opposition party but even so they are expected (a) not to lose their temper and (b) not to volunteer unnecessary information. At the same time, however, expert witnesses must also be careful not to omit material facts in their report even though they may not be in favour of their case. All opinions and conclusions in the expert witnesses’ report must be strongly supported with adequate and relevant information.
In a case of a fraud investigation, Forensic Accountants acting as financial expert witnesses must remember that the conclusion as to whether or not fraud has been committed is not for them to decide but for the judge or the jury.
Rakis Christoforou is the founder of RC Business Valuation & Forensic Accounting Ltd, the first company in Cyprus specialising in the areas of business valuation, for the determination of a business worth, and financial forensics involving litigation support on complicated financial issues and damage calculations. The company is also involved in assisting businesses in their debt restructuring and negotiation with banking institutions. For information contact email@example.com or visit www.businessvaluations.info
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