Beyond a Preponderance of Doubt?

Cindy Jones, CPA, CVA, CFE, is a well known expert witness in her home town of Pittsburgh, PA. She has prepared over 100 damage reports and testified at 18 different trials as an expert. Cindy decided to expand her practice and she recently obtained her CFE (Certified Fraud Examiner) designation from the Association of Certified Fraud Examiners. Cindy does an excellent job at business development and recently landed her first fraud engagement. Her investigation revealed an employment embezzlement scheme by the company's bookkeeper, which resulted in a $500,000 loss. The company reported the matter to the local police and the bookkeeper was arrested. Cindy is being called as the primary witnesses for the Government.

As she begins preparing her testimony she contemplates her opinion of how the scheme occurred and who was responsible for perpetrating the fraud. She contacts the local District Attorney's Office and asked if he needed her CV in order to qualify her as an expert. At that point the attorney informs Cindy that she is only testifying to her findings and won't be stating any opinions in this case. Cindy pauses and asks "Why not, isn't that what I've been hired for?"

Fraud examination engagements often bring the added responsibility of testifying in a criminal trial since the client may choose to file criminal charges against the fraudster. The government agency bringing these charges may rely on the consultant's report, which identifies the scheme, methodology used to commit the fraud, evidence uncovered during the investigation, and amount of fraud loss suffered by the victim.

Beyond a reasonable doubt is the standard required to be met by the prosecution in most criminal cases in our adversarial system. This means that the proposition being presented by the prosecution must be proven to the extent that there is no "reasonable doubt" in the mind of a reasonable person that the defendant is guilty. Civil trials require the plaintiff to prove, by a preponderance of evidence, the facts and claims asserted in the complaint. A preponderance of evidence, sometimes known as the 51% rule, has been described as just enough evidence to make it more likely than not that the fact the claimant seeks to prove is true.

While expert witnesses are permitted to testify to their opinions, the fraud examiner is limited to testifying to the facts associated with their findings. They do not render opinions. What are the differences between these two different types of witnesses and could the classification – expert versus fact – impact the outcome of a case? Consider the differences:

  • Expert witnesses help the court understand the complexities of the case.
  • Expert witnesses prepare written reports to support their testimony.
  • "Lay witnesses" are also considered fact witnesses.
  • Lay witnesses do not necessarily belong to a particular profession and are not usually experts in a particular field.
  • Fact witnesses solely testify to actual facts and do not draw conclusions from these facts.
  • Expert witnesses are permitted and expected to draw conclusions based on the facts to render an "expert opinion."

Let's go back to Cindy. She testified as a fact witness to the following:

  1. The bookkeeper issued and authorized checks to herself over a four-year period totaling $505,386.
  2. The bookkeeper's name appeared on the check; however, the check register showed the checks were issued for legitimate business related expenses.
  3. The bookkeeper ordered several personal items from various Internet sites and had the merchandise shipped to her home.
  4. The cancelled checks included the bookkeeper's signature on the back.

Cindy's testimony enabled the jury to convict the bookkeeper and afford the bookkeeper an opportunity to spend some quiet time in a local jail.

In related civil litigation, the accounting firm who performed the audit of the company was sued for accounting malpractice. The plaintiff hired an expert to testify regarding the failure of the accounting firm to properly conduct their audit in accordance with the Generally Accepted Auditing Standards, as prescribed by the AICPA. The plaintiff 's expert described in detail the audit procedures used by the accounting firm and describe how those procedures did not meet professional or auditing standards. In other words, it was the expert's opinion that swayed the court to rule against the accounting firm and award damages to the company for the accounting firm's negligence. As one can see, the fact and expert witness both serve to educate the trier of fact, but as one expert said to the fact witness: "keep your opinions to yourself."  

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