Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

CPAs who testify – can they be advocates for their clients?

CPAs, expert witness, testimony, court, law, testify, forensic accountingI was approached by a prospective client a few years ago requiring forensic accounting services in connection with his divorce. The prospective client made it clear to me what his ultimate objective was. He told me, “I want you to review documents I’m going to show you and conclude with me that my wife stole $225,000 from our investment accounts. You need to agree with my figure.” I replied to the husband, “What if I don’t find that your wife took the $225,000 and, therefore, can’t agree with your figure”? He replied, “Well, I’m the one hiring you. I’m the one paying your fees. You work for me. You need to do what I tell you.”

I’ve had other clients who initially are under the misconception that, since their attorneys are able to ethically be advocates for their litigation positions, their CPA testifying experts can do the same. My response to them is that our rules of professional conduct will not allow us to be advocates for our clients with the opinions we provide in litigation matters. We can only be advocates for our work and the resulting opinions that we present as a result of our work. Even if the CPAs’ Rules of Professional conduct did not give us guidance on being neutral in our opinions in the courtroom, most CPAs I know would believe they have an ethical responsibility to be fair to both sides in a litigation matter. This, even if it is to the chagrin of their clients.

In the American Institute of CPAs (AICPA) Special Report 09-1 of the Forensic and Valuation Services Section, Introduction to Civil Litigation Services, page 22, the following statement is made:

“(I)f the expert witness lacks independence of mind or objectivity or demonstrates bias, this may raise serious questions about credibility, reliability, and believability of the expert witness. If the practitioner believes the services cannot be performed with an independent mind and with integrity and objectivity, then he or she should inform promptly the client or attorney, or both, and decline the engagement.”

The AICPA’s Forensic and Valuation Services Practice Aid: A CPA’s Guide to Family Law Services states in Chapter 2, page 8 of the publication, “CPAs have certain roles and responsibilities in proceedings involving the resolution of family law matters. It is very important for the CPA to maintain objectivity because an unbiased opinion is in the best interest of both the client and the court. Moreover, the CPA should maintain objectivity to protect his or her own reputation and credibility, which is at stake throughout the engagement. An important distinction between the advocacy roles of attorneys and CPAs is that attorneys advocate for their clients, and CPAs advocate their professional opinions.”

The AICPA’s Principles and Rules of Conduct, Section 1.140.010 on Client Advocacy states, in part, at paragraph .02:

“The member shall also comply with the ‘Integrity and Objectivity Rule’ [1.100.001] that requires maintaining objectivity and integrity and prohibits subordinating one’s judgment to others.”

“Member” in this instance is a member of the AICPA. I have found that some Arizona CPAs who are not members of the AICPA, do not believe they are required to adhere to the Rules of Professional Conduct of the AICPA. This belief could be fatal. Rule R4-1-455.04, Professional Conduct: Interpretations, of the Arizona State Board of Accountancy states the following:

“The Board shall find interpretations of the Code of Professional Conduct adopted by the American Institute of Certified Public Accountants persuasive but not conclusive in the Board’s interpretations of R4-1-455.02, or R4-1-455.03.”

In summary, a CPA who is a testifying expert cannot be an advocate for his or her client’s position in a civil litigation matter. The CPA should strive to make their work fair to both parties, whether the Plaintiff or the Defendant – even to the detriment of their side’s position.

And, by the way, regarding the client that said I worked for him – I told him that I would not give him such an opinion if my forensic analysis of the records did not support it.

I did not accept the engagement.

Donald R. Bays, CPA, ABV, CVA, CFF