A competent expert witness is vital to cases involving economic damages and other financial calculations. However, the expert must be much more than just a mathematician, market analyst, economic guru or forensic accountant. The job of the expert is far from over once the facts are analyzed and the calculations are completed.
Traditional accounting and finance skills are not enough when it comes to litigation. A financial expert witness must qualify as an expert in court and must convey the findings to non-accountants on paper and on the witness stand.
Probably one of the most important yet difficult parts of being a financial expert is relaying the findings without using accounting lingo. Accountants often forget that not everyone speaks their language. They are not used to explaining their findings to people outside the finance environment. Creating a meaningful understanding for readers and listeners can be an art form unto itself, and the best financial expert witnesses do it easily.
Although attorneys are educated in many facets of the law, they are not necessarily numbers experts. That is why it is so important to find the right expert who can help legal counsel fully understand the financial data and its implications. A competent forensic accountant or other financial expert is mindful of the needs of non-accountants when reporting on the findings of a financial examination.
Selecting the Expert
The whole process starts with selecting the right expert for the job, and attorneys have lots of options. The expert could be an accountant, certified public accountant, private investigator, finance specialist, economist or fraud examiner. As with any type of expert witness, it is imperative to engage a competent, qualified financial expert who can clearly articulate the findings and opinions.
The ability to communicate an opinion must include the written opinion as well as testimony. It is always good to ask trusted colleagues for referrals to financial experts. From there, legal counsel should look for an expert who can immediately discuss accounting concepts and case theory in a way that the attorney can understand. If the expert is a good communicator in early discussions, this bodes well for the future.
In addition to the ability to convey accounting concepts, the attorney should also be looking for “soft” skills in the potential expert. Judges and juries respond better to likable witnesses. This means that the expert should display appropriate body language, make eye contact with the attorney or audience, read the audience to determine the level of interest and understanding, and exhibit a pleasant demeanor.
Your expert ought to be familiar with the Federal Rules of Evidence and be able to prepare a written, signed report. The report should include the basis for all opinions, information considered in forming those opinions, exhibits used as support for opinions, the witness’s qualifications (including publications and testimony history) and compensation paid for the expert’s work. If a potential witness is not familiar with this procedure, it indicates a lack of experience in the courtroom. An expert more familiar with legal proceedings is probably a better choice.
The best accounting expert for a case has strong technical skills, significant experience analyzing cases and testifying, and more than adequate communication skills. An expert’s references should speak to those traits, as well as to the expert’s ability to manage the workload and perform under pressure.
Examination and Reporting
Testifying in court as an expert witness is the pinnacle of a case, but lots of legwork is done before getting to that point. A competent expert performs an analysis with the courtroom in mind, documenting key dates, documents and discussions.
Good experts make it easy to locate supporting documentation in their files, and they keep notes that are devoid of gratuitous comments and irrelevant information. They never destroy documents or notes in an effort to sanitize a file. A thorough and logical paper trail during the examination or investigation makes it easier for the financial expert to prepare a report. In addition, a clean file makes cross-examination much easier.
The best expert reports follow a very logical format, which will depend upon the type of case. Some cases may require documenting the high points of the case in chronological order. In other cases the expert outlines the case by grouping facts by person or entity involved in the matter. Other logical formats may also be appropriate, but the key is using the format that makes the most sense and is easiest for outsiders to understand.
Good financial experts avoid technical accounting and financial terms and jargon as much as possible. In the event that some technical terms are necessary to a report, it is important to define clearly all concepts in lay terms. If multiple terms are used for the same concept, they should be defined. For example, I use the terms internal fraud, embezzlement, occupational fraud and employee theft interchangeably. It is critical for my readers to understand that they are synonymous in my report.
I approach the expert report in the simplest manner possible, assuming that the reader has no accounting or financial knowledge. The calculations and methodologies are broken down simply, and each step of the calculations is explained. The explanation includes the documentation used, the reason for making the calculation, the importance of the calculation to the final result and how the calculation was done.
The expert report may sound complex, but it can be made quite simple. The key is connecting the dots and not leaving anything out. Even if a part of the calculation is complex, a good financial expert explains and demonstrates the logic and mechanics. Any estimates used in the calculations should be clearly explained, with the expert indicating why the estimate was made, why it is reasonable and how it plays into the numbers as a whole.
Visual aids such as graphs and charts can be extremely helpful in conveying financial findings to a judge and jury. A juror might not understand three paragraphs explaining how an injured plaintiff’s income went up after an accident, but an effective line graph that highlights the increasing income may be just what the juror needs to understand the expert’s findings. A good graph or chart reinforces the expert’s opinion and possibly hits a home run with the jurors.
The final piece of a top-notch report is the attachments. A good financial expert includes selected supporting documentation with a report. Most do not attach volumes and volumes of material to the report. Rather, they select the most helpful and relevant items that support their opinions. This might include a copy of a check used in a theft, a report from the accounting system that shows key figures or a detailed schedule that shows how the expert derived a particular number.
Deposition and Court Testimony
Of course, a good report does not necessarily mean that the expert will be an effective witness in court. Being certified as an expert in court does not always come down to the education and credentials of an accountant or economist. Those factors are important, but the expert’s believability also speaks volumes to the judge and jury.
Preparation and prior experience are critical to testifying well. It takes a skilled witness to respond effectively to opposing counsel’s questions. Not all good accountants can remain calm under pressure, answer only the question asked by the examining attorneys, avoid falling into the trap of outlandish hypotheticals and know not to inappropriately change their opinions.
Preparation involving counsel and the expert witness is a vital piece of the puzzle. The attorney must know the financial aspects of the case inside and out in order for the testimony to go well. Preparation involves more than examining the high points of the expert’s opinion. It also includes considering weaknesses in the financial expert’s calculations and conclusions. Preparing prior to testimony will help flush out some of these potential pitfalls.
A competent financial expert orally outlines the facts of the case relevant to her or his opinions. Naturally, this must be done in a way that non-accountants can understand. The explanation must be logical, focused and relevant. Like the expert’s report, this testimony should remain free of technical language and industry jargon, if possible.
Good testimony feels natural and flows well. It is not a game of cat-and-mouse between the attorney and the accountant or economist. Juries react better to someone who is pleasant, with matter-of-fact answers to questions, rather than someone who is intent on sparring with opposing counsel.
Establishing rapport with the judge and jury is helpful when testifying. It is important to connect with the judge and jurors to draw them into your methodology and opinions. Some experts feel it is important to look at the attorney asking the question and then turn toward the jurors to provide them with the answer. This tends to look rehearsed and unnatural. Juries respond better to someone who is acting naturally, so this means that I look at the attorney, judge or jury whenever it feels appropriate.
Complex calculations can bog down the testimony. Therefore, it is important to connect the dots logically and simply explain each step of the calculations. Jurors may have little or no expertise in financial matters, so this is a critical point in a case. Prepare a process for logically explaining the numbers orally.
Large exhibits are helpful during the explanation of critical financial calculations. Some jurors may not understand the mechanics of the calculations simply by listening to testimony. A visual aid can give everyone a focal point to help with his or her understanding.
A financial expert witness can fall into many traps. One of the most critical is anticipating where opposing counsel is going with a line of questioning and providing answers so as not to fall into that trap. This can be dangerous, especially if the witness is mistaken about the anticipated questions. While it is acceptable to consider what might be coming next, a good expert witness will place most of her or his focus on providing an appropriate and truthful answer to the current question.
Another major trap in testifying is giving an inappropriate answer to a question. Sometimes opposing counsel will try to force a “yes” or “no” answer to a question that simply cannot be answered that way. A skilled financial expert will not give in and will not give the “yes” or “no.” Instead, he or she will say that it cannot be answered that way and will offer an explanation if it is warranted.
Answering certain hypothetical questions is another pitfall. Some experts readily answer all hypothetical questions because they believe a judge or jury will strongly consider that the question was only hypothetical. Yet that is not always the right way to handle it.
An expert should not fear agreeing with an attorney’s hypothetical if the facts warrant it. However, confusing or far-fetched hypotheticals should not necessarily be answered. One possible response to such a hypothetical is “I’d rather not speculate.” Alternatively, the witness may answer the question but indicate that the hypothetical is not reasonable. In the event that an expert feels compelled to give an answer to an unreasonable hypothetical, the attorney on her or his side should help clarify the issues later in the testimony.
At the end of the day, expert witnesses must make sure that counsel, judges and juries understand their opinions and how they were derived. Doing this well takes patience and practice, and attorneys are duty-bound to use experts who are skilled and experienced.
Accounting matters tend to bore and confuse the average person, but a good forensic accountant or other financial expert should explain and illustrate financial matters clearly and easily.
It is not enough to throw out a technical explanation and hope that everyone understands. It is the expert’s responsibility to read the audience and make sure that all parties understand the methodology and results. This can be ensured only by using qualified experts with testimonial experience and a thorough understanding of the litigation process.