Chapter 8 Power Point - Forensic and Investigative...

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Unformatted text preview: Forensic and Investigative Accounting Forensic Chapter 8 Litigation Services Provided by Accountants © 2009 CCH. All Rights Reserved. 4025 W. Peterson Ave. Chicago, IL 60646-6085 1 800 248 3248 www.CCHGroup.com Litigation in the United States The U.S. tort system cost $252 billion in 2007, which was $835 per U.S. citizen ($12 in 1950). Medical malpractice costs totaled nearly $30.3 billion in 2006, or about $101 per person (compared to $5 per person in 1975). Some of these costs are expert witnessing fees. (continued on next slide) Chapter 8 Forensic and Investigative Accounting 2 Litigation in the United States The five major phases of litigation are: Pleadings. Discovery. Trial. Outcome. Possible appeal. Much of the work for forensic accountants Much occurs in the discovery stage. occurs Chapter 8 Forensic and Investigative Accounting 3 Forensic Report Chapter 8 Forensic and Investigative Accounting 4 Civil Procedure Body of rules and practices by which justice is handed out by the legal system. is Federal Rules of Civil Procedure (FRCP): Procedure governs U.S. district courts.* district Federal Rules of Criminal Procedure. Procedure Federal Rules of Evidence. * Find at www.law.cornell.edu/rules/frcp/overview.htm Find Chapter 8 Forensic and Investigative Accounting 5 Types of Litigation Services Types Provided by Accountants Provided Consultant Expert witness Court-appointed experts and special Court-appointed masters masters Chapter 8 Forensic and Investigative Accounting 6 Standards of Conduct for Performing Standards Litigation Services Litigation Knowledge, skills, experience, training, and Knowledge, education. education. Professional codes of conduct. Conflicts of interest. Written agreement to perform litigation Written services. services. Chapter 8 Forensic and Investigative Accounting 7 Expert vs. Lay Witnesses A lay (or fact) witness testifies as to facts. lay fact witness An expert witness is an individual who, An expert because of specialized training or experience, is allowed to testify in court to help the judge or jurors understand complicated and technical subjects. complicated Chapter 8 Forensic and Investigative Accounting 8 Qualifying as an Expert Witness Under the Frye standard, the test for admitting expert Under testimony is: testimony – Whether the expert’s testimony will assist the Whether trier of fact in understanding the evidence or in determining a fact in issue. determining – Whether the theories and/or techniques relied Whether upon by the expert are generally accepted by the relevant professional community. the – Whether the particular expert is qualified to Whether present expert testimony on the subject at issue. present (continued on next slide) Chapter 8 Forensic and Investigative Accounting 9 Qualifying as an Expert Witness Under the Federal Rules of Evidence, a judge will Under permit an accountant to testify as an expert witness only if the judge decides that: if – The accountant’s testimony will help the jurors or The judge understand the evidence or determine a fact in issue. issue. – The accountant is qualified as an expert by The knowledge, skill, experience, training, or education. knowledge, – The accountant can show that his or her testimony (a) The will be based on sufficient facts or data and (b) will be the product of reliable principles and methods that have been applied reliably to the facts of the case. have (continued on next slide) Chapter 8 Forensic and Investigative Accounting 10 Qualifying as an Expert Witness In Daubert v. Merrill Dow Pharmaceuticals, In Inc., the U.S. Supreme Court established the Inc., rule for federal courts that trial judges have a special responsibility to ensure that scientific testimony is not only relevant, but also reliable. In Kumho Tire Company, Ltd. v. Carmichael, Kumho the Supreme Court decided that a judge’s “gatekeeping” obligation applies not only to scientific testimony but to all expert testimony. scientific (continued on next slide) Chapter 8 Forensic and Investigative Accounting 11 Qualifying as an Expert Witness In Daubert, the U.S. Supreme Court suggested that In Daubert the judges consider the following factors: judges – Whether the theory or technique in question can be Whether (and has been) tested. (and – Whether the theory or technique in question has Whether been subjected to peer review and publication. been – The theory or technique’s known or potential error The rate. rate. – Whether the theory or technique has attracted Whether widespread acceptance within the relevant community. community. (continued on next slide) Chapter 8 Forensic and Investigative Accounting 12 Qualifying as an Expert Witness Figlewicz and Sprohge in their article, “The CPA’s Figlewicz Expert Witness Role in Litigation Services: A Maze of Legal and Accounting Standards,” offer ten guidelines to help avoid legal challenges: guidelines 1. Know the relevant professional standards. 2. Apply the relevant professional standards. 3. Know the relevant professional literature. 4. Know the relevant professional organizations. (continued on next slide) Chapter 8 Forensic and Investigative Accounting 13 Qualifying as an Expert Witness 1. 2. 3. 4. 5. 6. Use generally accepted analytical methods. Use multiple analytical methods. Synthesize the conclusions of the multiple Synthesize analytical methods. analytical Disclose all significant analytical Disclose assumptions and variables. assumptions Subject the analysis to peer review. Test the analysis—and the conclusions—for —and reasonableness. reasonableness. Forensic and Investigative Accounting 14 Chapter 8 Preparing to Testify as an Preparing Expert Witness Expert Maintaining independence from the client. Evidence upon which experts may rely. Use of confidential client information. Expert reports. Working papers. Evaluation of other experts. Exhibits and other demonstrative evidence. Chapter 8 Forensic and Investigative Accounting 15 Testifying at a Deposition Expert witnesses can expect to be asked about the Expert following at a deposition: following The scope of their assignment. Their current employment (job title, duties). Their educational background. Licenses. Work experience. Memberships in professional organizations. (continued on next slide) Forensic and Investigative Accounting 16 Chapter 8 Testifying at a Deposition Publication and lectures. Fields in which they are qualified as an expert. Other work they have performed as an expert Other or other litigation consultant. or What compensation they are receiving (and What what percentage of their compensation is derived from testifying as an expert witness). derived What opinions they have formed. The bases for their opinions. Almost anything. Forensic and Investigative Accounting 17 Chapter 8 Cross Examination Tactics Do not speak to people outside courtroom while waiting and during Do breaks. breaks. Turn off your cell phone or pager before entering the court. Do not wear emblems. Do Avoid humor, but laugh at judge’s humor. Keep your hands on top of the table, not hidden. Be sure your attorney questions you in detail about your Be qualifications in order to impress the judge/jurors. Do not allow the not other side to stipulate you as an expert. stipulate Dress neatly and conservatively. Arrive on time at the court house (have multiple reminders). When taking the oath as a witness, say loudly, “I do.” When loudly Be sincere and respectful. (continued on next slide) Chapter 8 Forensic and Investigative Accounting 18 Cross Examination Tactics Talk directly to the jurors (or judge if no jurors). Look them in the eyes. Talk directly Make contact with each of the jurors. Make Explain number carefully, possibly using analogies with tax returns and Explain checkbook. checkbook. Pausing does not harm you. Use first person, active person: I reviewed these records, and I found…. Tell stories about people. Be careful when shown passages from textbooks, etc. Jurors have nothing to do for long periods. They are always watching. Be Jurors careful every place in the court house, even while driving to the court house. house. When you are in trouble in the court room, do not lean back. Instead lean When no lean forward. forward. When you are finished, do not leave the courtroom until there is break. Chapter 8 Forensic and Investigative Accounting 19 Testifying at Trial According to Bursztajn and Brodsky in their article, According “Ethical and Effective Testimony During Direct Examination and Cross-Examination Post-Daubert,” the following should be the primary goals of an expert witness: witness: – To communicate the truth to the jury in an ethical, To objective, and effective way. objective, – To maintain your autonomy, authenticity, and To integrity. integrity. – To uphold the values of your profession. (continued on next slide) Chapter 8 Forensic and Investigative Accounting 20 Testifying at Trial – To interact with attorneys and with the judge and To jury in an atmosphere of mutual respect. jury – To engage in an ongoing dialogue with your To attorney so that, together, you can educate as well as learn from the judge and jury as to what questions each may have. each – To speak directly to the issues. – To make complex matters understandable without To oversimplifying. oversimplifying. Chapter 8 Forensic and Investigative Accounting 21 Liability of Expert Witnesses Witness immunity – Threat of lawsuit – Claims of negligence Bases for liability – Breach of contract – Negligence – Criminal process Chapter 8 Forensic and Investigative Accounting 22 Searchable Databases of Daubert Decisions Searchable Daubert 1. Daubert Tracker (launched August 2002) • 570 accounting decisions (mid-July 2006). • 314 accounting experts admitted, 203 denied, 53 admitted/denied 314 admitted 203 denied 53 in part. in • 55%, 36%, and 9.3% ratios • 14,000 trial and appellate opinions. • 21,000 expert reports. • Composed of five distinct services. Composed five The searchable database of all reported cases. Core documents – docket sheets, briefs and transcripts – for each case. An e-mail update of new cases from the previous week. A quarterly journal with articles by trial attorneys, law professors, judges quarterly and experts. and A series of “Web lectures” delivered by authorities on Daubert and series Daubert scientific evidence. scientific • www.dauberttracker.com. A year subscription is $295. Chapter 8 Forensic and Investigative Accounting 23 Daubert Chapter 8 Forensic and Investigative Accounting 24 Searchable Databases of Daubert Decisions Searchable Daubert 1. “Daubert on the Web” • Online free tracking service. • www.daubertontheweb.com. • In July, 2009, 87 cases were under the field “Accountants and In Economists” with an admissibility rate of .598. .598 • There are a total of 25 fields with various “admissibility rate,” There such as such Appraisers Computer experts, Computer Criminologists, Marketing experts, Polygraphers, Statisticians, 0.800 0.667 0.667 0.847 0.333 0.121 0.625 In Louisiana, there have been at least 33 Daubert challenges with a 60% admission rate. Chapter 8 Forensic and Investigative Accounting 25 Written Reports An expert should never draft a written report An never of any kind unless he or she has been expressly directed to do so by hiring counsel. expressly Federal Rules of Civil Procedure 26(a)(2)(B) Federal requires a written report. written report Keep a diary of interview dates, etc. Do not destroy interview notes. Do not Chapter 8 Forensic and Investigative Accounting 26 Written Report Contents (FRCP 26(a)(2)(B)) All opinions to be expressed and the bases for them. Data or other information considered in forming the Data opinions. opinions. Any exhibits to be used as a summary of or support for Any opinions. opinions. Witness qualifications, including a list of all publications Witness authored within the last 10 years. last Witness compensation. List of other disputes in which the witness has testified at List deposition or trial during the last 4 years. last Signature of the expert testifying. Note: Federal Rule of Civil Procedure 27(e)(1) indicates that an Note: expert must update a written report or disposition. update Chapter 8 Forensic and Investigative Accounting 27 Types of Expert Reports Fact-oriented report – gathers and evaluates facts and uses them to prepare a report. Check and re-check the numbers and the facts. and Opinion report (e.g., valuation report) – more subjective and rely more on the professional judgment of the expert. judgment Combination of above types. Chapter 8 Forensic and Investigative Accounting 28 ...
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