Expert witnesses always have their work cut out for them, explaining technical and/or complex information to a jury of laypeople. The more intricate the topic, the more crucial it is that the witness not only holds a deep understanding of the issues at hand, but can clearly articulate them in a way that makes sense to the jury, and holds their attention. In a current high profile case against PricewaterhouseCoopers (PWC), I worry less about the former, and more about the latter. Let’s be real: how many regular folks have any interest in the ins and outs of accounting audits?
These twelve people will have to. This is the biggest ever trial of an audit firm. The plaintiff, Taylor Bean & Whitaker Trust, a former U.S. mortgage lender that has since filed for bankruptcy, is asking for $5.5 billion in damages. That’s a number, according to the Financial Times, that is “above PwC’s pain tolerance” and “forces them to go to trial.” There, the jury will decide if PwC is to blame for failing to spot a seven-year-long, $2.9 billion fraud scheme carried out, strangely enough, in part by the plaintiff.
That decision will hinge largely on the expert witness testimony of a diverse team of CPAs and financial professionals. These folks will have to weed through the big numbers and lurid details of the case – the money stolen by Taylor Bean and its cohort, Colonial Bank, was used by top executives for things like corporate jets, a seaplane, and a vintage car collection – to untangle the tricky topic of the degree to which auditors are responsible for detecting fraud.
This will likely entail a detailed explanation of what exactly auditors like PwC actually do, both in theory based on the standards of the industry, and in reality, in these circumstances. The experts will have to dive into not just the processes and “rules” of an audit, but the ethics as well. Taylor Bean claims that if PwC had done its job, they would not have lost billions of dollars and been forced into bankruptcy (their own guilt notwithstanding.) PwC claims that it DID its job to the best of its ability, but was deliberately foiled by Taylor Bean. The “truth” intuitively feels somewhere in between, but that’s not how this works: the experts must help the jury decide where to draw that line of responsibility.
Given these intricacies, it’s unsurprising that the legal teams are calling a diverse selection of expert witnesses to the stand. In the chart below from ForwardForensics, we see experts in professional auditing and accounting standards, ethics, damages and causation, corporate governance, internal control standards, and more. It demonstrates the importance of knowing your experts’ precise area of expertise, and selecting them based on that specific proficiency. That’s easier said than done, but especially in trials with such high stakes, it couldn’t be more important. We’ll see if these experts can make audits interesting and understandable enough for the jury to make the right decision.
