Academic journal article Journal of Accountancy

Expert Testimony after Daubert

Academic journal article Journal of Accountancy

Expert Testimony after Daubert

Article excerpt

Meeting reliability standards in case A doesn't give a CPA witness a leg up in case B.

At the fall 2000 AICPA Advanced Litigation Services Conference, Judge Alex Kozinski's keynote speech, "A View From the Appellate Bench: The Changing Landscape for CPA Experts--Beyond Daubert," covered a few points relevant to CPA expert witness testimony. Judge Kozinski serves on the U.S. Court of Appeals' Ninth Circuit, Pasadena, and had been one of the judges to hear Daubert v. Merrell Dow Pharmaceuticals, Inc. In overturning Daubert in 1993, the U.S. Supreme Court altered a standard that had been in place for 75 years and gave trial court judges more gatekeeping responsibility to screen technical and scientific testimony before it gets to jurors. A Q&A between KPMG partner Ron Durkin (then an Arthur Andersen partner) and Judge Kozinski followed the speech and addressed some CPA witness admissibility issues.

Kozinski: The question Ron Durkin raised was "How far does Daubert go? Does the court's resulting gatekeeper obligation to vet the validity of expert testimony pertain only to cutting-edge scientific discoveries, or does it spill into other areas?"

In its 1999 Kumho Tire decision, the Supreme Court upheld the Daubert standard and said, "We live in a Daubert world." It pointed out that there's a thin line between scientific and other experts. In the end, the type of expert doesn't matter.

Daubert announced a four-part test to determine admissibility of an expert witness's testimony. It asks:

* Is the witness an expert in the sense of having credentials or experience?

* Does the testimony have a basis in fact?

* Is it relevant and reliable?

* Are there other factors that bear upon the question of admissibility?

Durkin: Are federal and state court judges aware of AICPA professional standards governing our profession, particularly standards dealing with objectivity and integrity?

kozinski: Yes and no. We're generally aware there are standards and they must be met before someone is certified. But the important thing about any credential is that it helps to qualify the expert in a particular case. Just saying you're a CPA won't do it. A CPA who is testifying must carefully set out what the standards are, explain what CPA certification requires and why he is entitled to be considered an expert in a particular case. It's very important to put the evidence in every case. If there's an appeal, it's there in the record.

Durkin: How do appellate court judges evaluate an appeal regarding the application of Daubert challenges to CPA experts?

Kozinski: There's dispute on the question of how appellate courts review decisions to admit or exclude experts under Daubert, and the federal circuits have gone in different directions. There are two ways to view the question. One of them is to look at the evidence the trial judge considered and then ask what we would have done under those circumstances. If we disagree, then we simply reverse the trial judge.

The Supreme Court made it quite clear the standard we appellate judges use is the abuse of discretion standard, which basically asks, "Would the trial judge have to have been drunk or crazy to make this decision?" If we think a sober person could come to that conclusion, then we have to let it stand.

What this tells you as a CPA expert witness--and this is very important --is that you are going to have to persuade the trial judge that your testimony is sound. Then you can feel quite secure that if the trial judge said the evidence was admissible--citing Daubert and Kumho--and went through the facts and looked at the standards, there is almost no way that the decision to admit evidence will be reversed on appeal.

Durkin: If an expert witness does not survive a Daubert challenge, is he guilty of malpractice?

Kozinski: It depends a lot on why the expert gets bounced. …

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