Villela & Shilts CPA Insight Issue #3

1. Issue 3, Oct. 2015
Recent Florida Case verifies the
Importance and Need of a Forensic
Accountant to Validate the Truth
CPAs are not in the trust business, they must always
verify and never produce anything which could be
assumed as
subjective or
unsupported. This
case is a further
example of the
importance for
CPAs providing
litigation services
to provide support
for their methods
and conclusions.
CPA experts need to conduct the appropriate
procedures (e.g. sampling, audit tests, research,
interviews, etc.) to validate their method and ensure
the appropriateness of what they are delivering.
The Florida case we mention, Hedges v. Klaus
Doupe, PA1, has certainly increased the level of
scrutiny, and in my opinion diligence, necessary for
financial experts to opine on financial issues.
In Hedges, an expert’s testimony was partially
excluded when the expert used a goodwill valuation
method and subjectively applied factors to a
numbering system to determine the amount of
goodwill attributable to the enterprise. The court
found his testimony as to goodwill “was pure
opinion testimony” and reasoned “in adopting the
Daubert standard in Florida, our legislature clearly
stated its intent to prohibit the admission into
evidence of pure opinion testimony.” It was
discovered that the expert never conducted a site
visit nor did he interview client employees or
customers.2 The expert never attempted to provide
data or evidence to validate his data or valuation
approach. Jenkins and Mard provide examples of
opinions from other cases that support their
argument that opinions must derive from some form
of “scientific knowledge”. They explain that to
qualify as scientific knowledge “an inference or
assertion must be derived by the scientific
method…the scientific method means developing
hypotheses and testing them through blind
1 Hedges v Klaus Doupe, PA, (woth Cir. 2014), Order
2 “What the Daubert Test Means to a Financial Expert, Part
One: The Impact of Florida and What it Means to Financial
Expert Witnesses”. The Value Examiner May/June 2015. Joryn
Jenkins, Esq. and Michael J. Mard, CPA/ABV
“CPAs are not in the trust
business, they must always
verify and never produce
anything which could be
assumed as subjectiveor
unsupported”
The Insight
Issue 3, October 2015Villela & Shilts, LLC
www.villelashilts.com

2. Issue 3, Oct. 2015
experiments (empirical testing) to determine if they
are verifiable.”
CPAs are not in the trust business, they must always
verify and never produce anything which could be
assumed as subjective or unsupported. This case is a
further example of the importance for CPAs
providing litigation services to provide support for
their methods and conclusions. CPA experts need to
conduct the appropriate procedures (e.g. sampling,
audit tests, research, interviews, etc.) to validate
their method and ensure the appropriateness of what
they are delivering.
In science and other forms of research a common
used technique is heuristics. Heuristics can best be
explained as “a method of argument in which
postulates or assumptions are made that remain to be
proven or that lead the arguers to discover the proofs
themselves.” This seems like a reasonable approach
for any researcher or scientist to discover a new
method or formula to solve the world’s troubles.
But, for financial experts providing testimony in
Florida Courts, heuristics can prove to be a method
if employed.
Important Dates
Oct. 15, 2015
 Final deadline to file your 2014 personal tax
return if you filed an extension on or before
April 15.
Oct. 20, 2015
 Final deadline to resubmit a rejected 2014
return that was originally e-filed on or before
Oct. 15.
 If you’re expecting a refund and miss the Oct.
20 e-file cutoff date, you have until April 16,
2018 (Oct. 15, 2018, if you filed an extension)
to file a paper return and claim your 2014
refund.