Expert Testimony Before a Trier of Fact
Providing litigation support often involves expert witness testimony at either the administrative appeals or judicial level before a trier of fact.
The first part of the discussion presents recommended procedures for accountants who provide expert testimony. These recommended procedures apply equally to accountants employed by plaintiffs and by defendants. The second part of the discussion focuses on typical expectations of triers of fact regarding expert witness testimony.
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ccountants are often called upon to provide litigation support and dispute resolution services. For example, these services might be rendered with regard to valuation-related controversies such as gift, estate, income, and property reorganization matters; shareholder disputes; and breach of contract and other commercial damages cases. These services often involve expert witness testimony at either the administrative appeals or judicial level. Expert testimony could be either at a deposition, at a hearing, or at a trial.
Expert Testimony Procedures
The following recommended procedures for accountants who give expert testimony are not presented in any particular order of significance. As with all professional conduct, expert testimony procedures are ultimately a matter of the accountant's reasoned judgment and personal experience.
Your expert report is your best friend. This is true on the witness stand and during deposition testimony. Accordingly, you should always bring your expert report to the witness stand (or to the deposition). It is appropriate to refer to the report as often as possible, and it is acceptable to read from it when necessary. Expert testimony is not a memory test.
You should be fully prepared to present the expert testimony. This means that you should review your expert report, workpapers, and notes just before testimony. Of course, it is necessary to be familiar with the facts of the subject case. In addition, you should be familiar with--and be prepared to explain--your expert report, any analyses, and your conclusions.
As an expert witness, you should always tell the truth--as you believe it. Expert witnesses (particularly accounting witnesses) always win by telling the truth--i.e., honestly and factually asserting their opinions. As an accountant (and as a witness), you should believe in the truth of your analysis and conclusions. You want to demonstrate to the trier of facts that you have an apostolic--almost religious--conviction in the truth of your testimony. By analogy, even if the missionary doesn't convert the nonbeliever, he never loses faith in the truth of his conviction. Likewise, even if the trier of fact doesn't agree with your conclusion, you will still win the case from a professional conscience perspective if you believe in the truth of your professional opinion.
Unless you are absolutely certain of your answer, don't trust your memory. Also, you should not guess the answer to a question, either in direct examination or in cross-examination. It is always appropriate to refer to your expert report when necessary. It is also appropriate to refer to a specific document, workpaper, or data source to refresh your recollection. While on the witness stand (or when being examined in a deposition), it is appropriate to take all of the time you need to completely read all documents you are asked about. When it is the truthful answer, you should not hesitate to admit: "I don't recall." Also, when it is
the truthful answer, you should not hesitate to admit: "I don't know."
Be careful when confronted with short quotes. Accountant experts are often confronted with short quotes from their expert reports, from the opposing experts' reports, from professional standards, and from other materials. You should not feel compelled to agree with short quotes taken out of context. You should not feel compelled to read--and you should not allow the examining attorney to read--only partial quotes from your expert report, a treatise, or other document. It is appropriate to always read the entire quote to yourself--and into the record--before answering the question you are asked. In fact, it may be appropriate to read several paragraphs--or even an entire page--if necessary, before answering a question regarding a quotation. In summary, it is important for the expert witness to put the quote in its complete context.
It is usually inappropriate for an expert to argue during testimony, either with the examining attorneys or with the trier of fact. It is also inappropriate for an expert to get excited. It may be helpful to recall the deodorant commercial slogan suggesting that you remain in control when under stress. It is not uncommon for experienced accountants to assume an academic or pedantic attitude during expert testimony. After all, professors don't argue with their students, they educate them. And as an expert witness, you're in the courtroom to give expert advice to--i.e., to educate--the trier of fact. It is not the role of the expert witness to litigate the case; that's the lawyer's job. It is not the role of the expert witness to decide the case; that's the job of the trier of fact. It is usually considered inappropriate for an expert witness to advocate for the position of the client. Rather, it is entirely appropriate for the expert witness to advocate for the truth of his or her professional opinion.
During expert testimony, it is always appropriate to admit mistakes. It is also appropriate to admit any omissions. Accountant expert witnesses are sometimes confronted with the question: "If you had known XXX, would that change your opinion?" If the truthful answer to that question is yes, then the appropriate answer is yes. Intellectually honest experts can change their opinions based on new information. It is a truism that even the best experts sometimes make mistakes; however, it is also a truism that the very best experts admit their mistakes, correct them, and continue with their testimony.
It is always appropriate to admit any material methodological or conceptual inconsistencies with prior expert reports, expert testimony, or publications. If it is relevant to any apparent inconsistencies, it is appropriate for the witness to explain how the facts and circumstances in the instant case are different from previous litigated cases or previous expert reports. It is appropriate to admit that your methodology or research has changed over time. It is intellectually honest to admit, "I've changed my opinion of that issue." All intelligent life forms (including accountants) evolve over time.
It is appropriate to admit any inconsistencies in your analysis with (and departures from) generally accepted professional practices and authoritative treatises. Nonetheless, it is equally appropriate to explain why these analytical inconsistencies and departures are appropriate under present facts and circumstances.
Be honest about your expertise. Accountant expert witnesses are frequently asked the following type of voi dire question: "Are you an expert in the XYZ industry?" Obviously, the question is intended to imply that you do not have the appropriate experience or expertise on the subject matter. For example, one appropriate answer to such a question may be: "I am an expert in analyzing companies (or securities or assets or properties or economic damages) in the XYZ industry. My testimony is based on my accounting and consulting experience and expertise and not on any operational experience in a certain industry."
You should completely explain what you did and why you did it. If you are confident with your analyses and conclusions, you should readily: 1) admit to procedures you didn't perform; 2) admit to interviews you didn't conduct; 3) admit to documents you didn't review; and 4) admit to research you didn't complete. As an accounting expert, you should be confident when you completely explain why what you did was adequate and appropriate under the circumstances.
As a professional, you should not be defensive about your experience or credentials. Rather, you should be proud and confident of whatever experience and credentials you have. Of course, it is appropriate to forthrightly admit any negatives or deficiencies in your professional experience or credentials. Likewise, it is equally appropriate to stress all the positives about your professional experience and credentials.
Experienced expert witnesses don't underestimate the importance of the redirect examination phase of expert testimony. The redirect examination period is your opportunity to expand upon those areas of direct examination testimony that were questioned during cross-examination, to clarify any confusion that may have occurred during the questions and answers in cross-examination, and to complete any otherwise incomplete answers to questions--e.g., answers that were cut off by the opposing counsel--during cross-examination.
Beware of references to your report intended to trip you up. Accountant witnesses typically encounter such cross-examination follow-up questions: "Where does it say that in your expert report? or "It doesn't say that in your report, does it?" These questions are intended to imply that: 1) your expert report is inadequate or incomplete, 2) you changed your conclusion between the time you issued your report and the occasion of your testimony, or 3) some aspect of your testimony is inconsistent with what you wrote in your expert report. A common response to this type of question follows: "I endeavored to make my expert report as comprehensive as possible. In my previous answer, I was simply expanding on the description (or the conclusion or the data) presented in my report."
Experienced witnesses avoid answering multiple--or compound--questions, during either direct examination or cross-examination. Multiple or compound questions tend to obfuscate the record of the proceeding and confuse the trier of fact. Multiple or compound answers to these questions only tend to exacerbate the confusion. When presented with multiple or compound questions, it is appropriate to state your problem with the question. To keep the record clear, you should ask the examining lawyer to rephrase the question into a simple sentence before you answer.
For the benefit of the trier of fact, you should not answer vague, ambiguous, or imprecise questions, during either direct examination or cross-examination. Similarly, you should not answer questions that you don't understand or questions that include incorrect or imprecise use of jargon. For the benefit of the trier of fact, you should clearly and concisely state your problem with the question. When presented with a vague, ambiguous, or imprecise question, you should ask the examining lawyer to rephrase the question before you answer it.
To keep the record clear, you should not answer leading questions, during either direct examination or cross-examination. For the benefit of the trier of fact, you should clearly and concisely state your problem with the question. When presented with a leading question, do not hesitate to ask the examining lawyer to rephrase the question before you answer.
As with the presentation of any oral report, you should remember the audience for your testimony. You should talk directly to the judge (or to the jury). If the layout of the courtroom permits, you may want to turn and face the judge (or the jury) when answering questions. Remember that your job in the litigation process is to educate, enlighten, and convince the trier of fact. It has been said that the role of a testifying expert is somewhere between professor and preacher.
Although it should go without saying, it is important to answer all questions completely. This may not be as easy as it sounds. Sometimes, examining lawyers will cut off your answers, either deliberately or unintentionally. For the benefit of the trier of fact, you should not allow your answers to be cut off. If the examining lawyer cuts you off with "you've answered the question," you can respond to the trier of fact "no, I have not completely answered the question." When necessary, you may directly address the trier of fact with a statement such as: "I didn't answer the last question completely and I would like to ensure the record is complete in that regard." You may encounter a lawyer who admonishes you: "Answer this question with a yes or no." For the benefit of the trier of fact and to ensure the completeness of the record, an appropriate response may be: "A yes or no answer would not completely answer that question and may be misleading to the court."
Court's Expectations Regarding Expert Testimony
This discussion will focus on the more common expectations of the trier of fact regarding an accountant's expert testimony. This list of expectations is not presented in order of relative significance.
Courts expect expert reports to be more comprehensive, more thorough, more rigorous--and more readable--than even a few years ago. The expectation is that the expert report will stand on its own, and that it will tell the entire story. Courts expect the presentation of market-derived, empirical data as justification for an analysis (e.g., transactional pricing multiples, direct and yield capitalization rates, and business valuation discounts and premiums). Courts are less persuaded by the analytical justification "in my opinion ..." and more persuaded by the analytical justification "based on the market-derived, empirical evidence presented in my expert report ...."
Courts prefer expert witnesses to avoid the use of vague phrases such as "in my opinion ...," "based on my judgment ...," or "based on my experience ...." When possible, triers of fact seem to prefer that accountant experts use positive phrases such as "my analysis indicates ...," "the data supports ...," or "the market tells us ...." These positive phrases provide triers of fact with explanations and justifications for their eventual opinions.
In recent years, courts seem to be more willing to consider Daubert motions. Based on the U.S. Supreme Court Daubert decision, these motions (usually made after the voi dire ) ask the judge to exclude the testimony of an expert witness based on "junk science"--or, in the case of accountants' testimony, on "junk economics." A discussion of the Daubert case and changes to the rules of evidence appeared in the January issue of The CPA Journal .
In recent years, triers of fact seem to prefer that experts avoid statements such as "it is the state's position that ..." or "it is my firm's position that ...." As an accountant, you should be mindful of the fact that you are the expert--not your corporate or governmental employer. All expert opinions should be your professional opinions, based on your training, experience, expertise, and reasoned judgment--and not based on your employer's institutional dogma.
Courts prefer that experts rely upon authoritative treatises, credentialing society courses, and promulgated professional standards. Relying upon the positions, published or otherwise, of single individuals is typically discouraged, regardless of their credentials. Accounting witnesses should generally endorse common professional standards and accepted industry practices. As a corollary, accounting witnesses should generally avoid relying upon a single individual's unproven position, such as "Dr. Jones says ..." or "Professor Smith says ...."
As a professional accountant, it is particularly important that your expert testimony does not devolve into personal attacks on the opposing experts. Courts don't like he said versus she said expert testimony. Courts prefer to rely upon empirical and market-derived evidence, authoritative literature, and informed professional judgment--and not upon juvenile comments between temperamental experts.
Courts appear to prefer that accountant experts bring all aspects of any analysis back to the specific facts and circumstances of the instant case. Abstract formulas and conceptual theories are great--but triers of fact seem to want to understand how they apply to the specific set of facts and circumstances in front of them. *
Robert F. Reilly, CPA, is a managing director of Willamette Management Associates, a valuation consulting, economic analysis, and financial advisory firm.
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