Academic journal article Journal of Accountancy

Court Sets Expert Standards

Academic journal article Journal of Accountancy

Court Sets Expert Standards

Article excerpt

A New York federal court ruled that an accounting firm providing expert consulting services to a client cannot be disqualified from a case without evidence that the firm acquired confidential information from an adverse party during a prior engagement.

The accounting firm of Johnson, Lambert & Capron (JLC) was retained by the Vermont commissioner of banking and insurance to audit Ambassador Group Inc., an insurance company in receivership. As part of this engagement, the firm audited one of Ambassador's reinsurers, RCA, which supplied it with financial statements but provided no access to books and records. (JLC had also done other similar unrelated work for the commissioner.)

The commissioner's office, as receiver, brought suit against Ambassador's outside auditors, Coopers & Lybrand. Coopers hired JLC to act as an expert (the entire firm supplied litigation support srvices) in challenging the receiver's calculation of the loss caused by Ambassador's insolvency. The commissioner filed a motion to remove JLC from the case because its past association with RCA and its other work for the commissioner had furnished it with confidential information. …

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