A forensic accounting firm often encounters questions of causation in the course of preparing expert testimony for hearings or trials. A key issue to address is the extent to which an expert may provide testimony about causation itself. Because causation is a material issue in most litigation, courts subject expert testimony on causation to close scrutiny before allowing it to come before the trier of fact. Courts weigh the adequacy of a forensic accountant’s testimony regarding causation by examining factors that include the following:
• The expert’s qualifications.
Does the expert have sufficient experience with the kinds of issues involved in causation questions to reach reliable conclusions? In examining the expert’s qualifications, courts consider whether the expert personally possesses the requisite experience or has relied on the expertise of others to reach his or her conclusions. Reliance on third-party expertise can make the third party’s qualifications a separate matter of proof.
• Multiple methodologies.
A forensic accountant’s testimony about causation and damages is more likely to withstand questions about its sufficiency if it is based on more than one methodology. For example, an expert might calculate damages using both the yardstick method and the before-and-after method.
• Consideration of alternatives.
An expert’s testimony gains credibility if the accountant has given due consideration to other potential causes of the plaintiff’s damages. In many cases, financial losses can have more than one cause. An expert must account for the full range of possibilities and either rule out unlikely causes or factor credible causes into the analysis. Assigning only a portion of the plaintiff’s losses to the defendant’s alleged misconduct may be appropriate.
“An expert’s assumptions about causation can undermine the reliability of testimony and can create two significant risks,” said HSNO partner, Christopher Money. “The first is that causation doesn’t exist at all. If the defendant can show that the expert’s assumptions are based on faulty reasoning, the entire testimony may be excluded. The other risk is if other factors contributed to the plaintiff’s losses and the expert hasn’t given them adequate consideration. An experienced forensic accounting firm knows to carefully examine assumptions to account for these risks.”
At HSNO, we provide expert testimony in a wide range of cases that involve complex financial questions. Meeting the standards set by the courts for expert testimony is a core part of what we do. If your case could benefit from the expert testimony of a forensic accounting firm, please contact us today to find out how we can serve you.