By: Austin Starkey & Jason Ligon
As a litigation attorney, you could eventually need a financial expert in a case. But if you rarely or never engage one, you might be unsure of where to start that search. Do you consult your peers? Do you ask the professional who files your taxes? Do you just start Googling terms like “Certified Public Accountant”, “financial expert”, and “litigation support”?
As you research your options, you likely have your client’s budget in mind. You want to keep the cost low, but you have concerns about whether your potential expert can survive a Daubert challenge. Ultimately, you want to settle the case in a manner that satisfies your client.
If your tax accountant says they can probably handle the work, beware. The Certified Public Accountant (CPA) license spans a wide spectrum of subject matter; thus, a CPA in the context of audit or tax is vastly different from a CPA in the context of litigation support services. We encounter accountants moonlighting as financial experts and operating outside their depth all too often, and these would-be experts are vulnerable to criticisms of their CVs, if not a formal Daubert challenge. A typical accountant is likely ignorant not only of the specific procedures involved to provide litigation support services, but also the time necessary to complete them. In other words, they don’t know what they don’t know.
Qualified financial experts have the SKEET—Skills, Knowledge, Education, Experience, and Training— that most CPAs lack. These attributes are what make a “good” financial expert and help you win your case. The culmination of these five elements are necessary to make a well-rounded and effective expert. Experts must continually seek training and education to keep with changes in the business and accounting environment, much like attorneys must do as new laws and regulations are passed.
Additional certifications and advanced degrees are not always applicable to the careers of our accounting peers in audit and tax, but they are extremely important to obtain knowledge, education, and training necessary for being a financial expert. Such certifications require completing coursework, passing exams, and earning certain experience on top of the requirements to obtain a CPA license. Maintaining licenses and certifications requires annual continuing education on matters specific to providing litigation support services and opining as to financial damages. In addition to credentials, advanced college degrees add significant value to experts and strengthens your expert’s position during critiques of their CV or during a Daubert challenge. Financial experts have to consider all aspects of a business from operations to sales, accounting, and financial reporting, which cannot be obtained just by obtaining a CPA license.
An accountant or economist that is not regularly involved in litigation matters is frequently unaware of the methodologies associated with this subject matter. Could they explain before-and-after, market share, yardstick, or forecasting approaches for calculating lost profits? How much experience do they have examining legal documents and forming conclusions of damages based on the terms of a specific contract? To a financial expert, these are everyday concepts. Subsequently, a qualified financial expert can convey all this information in front of a judge or jury when it’s show time. Testifying is not at all common among CPAs outside of this specialization; whereas, financial experts regularly sit on the hot seat during depositions and trial testimony. In many circumstances, financial experts have undergone training specifically to prepare for such situations.
Consulting a well-qualified expert early in the litigation process can lead to significant efficiencies in quantifying damages. For example, an expert can assist in the request for documents, evaluate discovery documents, and provide insight on potential issues. The sophisticated expert likely has a team under their supervision contributing a large portion of the assistance and analysis required – they can offer that assistance and analysis at a lower hourly rate than that of the testifying expert. Experienced experts will eliminate many of the “surprises” and uncertainties from the damage quantification process.
When you find yourself in need of a qualified financial expert or need assistance interpreting the financial aspects of a case, Elliott Davis and our team of litigation support professionals are ready to help. Contact the team members: