Why we use CPAs to testify about accounting statement fraud

Disclosure: While I have served as professional accounting witness in other unrelated court cases, I did not testify in past Trump fraud cases. In past Trump fraud cases in the 1990s, I offered accounting statements taken by an attorney for the plaintiff victims that included a statement of my direct communication with Trump and his accountant, as well as my understanding of the accounting aspects of the underlying transactions. I did not testify at trial.

A peer CPA expressed that he did not see why a non-certified person was not an inappropriate witness in a trial about fraud in the Trump financial statements last week. I strongly disagreed. Because I think this is a teachable moment for the public, I wrote this more detailed comment in response in a social media forum. This post is an extract of that response.

The main point is that there is good reason why our courts rely on certified and experienced Certified Public Accountants to offer opinions at trial on the possibility of fraud in financial statements. This is an important part of the underlying standards of our professional legal and accounting systems. This is the foundational basis of applicable law. Without these standards, professionalism in both the court system and accounting profession is destroyed.

I suspect anyone who ever testified as an expert witness at a hearing or trial probably will recall that the majority of questions asked by counsel on both sides pertained to your background, your licenses, your past experience. The reason is that the court is more concerned about the relevance of your testimony in conformity to their established framework of expert witness testimony than the content of your actual opinion. This is the key to understanding this specific matter.

The Trump fraud trial in New York is not an academic debate on academic accounting principles. If it was

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, this professor might have been a good witness. This is a trial about fraudulent financial statements issued to business associates. Fraud has already been established, in fact, by the court. Our society happens to have a certification program for experts in detecting fraud in financial statements that are issued to members of the public. Those experts follow a rigid and well-developed set of standards when offering opinions to the public about financial statements, particularly surrounding responsibility for detecting fraud. Those are called “Statement of Standards on Attestation Engagements“. Obviously I am writing this for a non-CPA who might not already know this. A person lacking acceptance of this standard might be triggered to sound an alarm that the testimony of a non-certified accounting expert is irrelevant in this trial and probably serves to help the prosecution rather than the defendant in this case.

Of course, the CPA license itself does not, in itself, convey expertise in any topic and certainly not the ability to testify in any trial in the matter of fraud in financial statements. That expertise is built up over a career of and compilation of a track record of offering public opinions about fraud in financial statements. Certainly, there are tons of those qualified experts who meet that rigid standard of quality in the City of New York. It might be worthwhile considering why the defense did not offer a witness who falls in this category.

Finally, we should consider that this trial is not about debating the definition of financial fraud. You might realize this after listening to Fox network or reading comments of non-experts on social media. The fact is that the definition of fraud is already clearly established, has already been found to exist under that definition in this case, and this court will not be influenced by an academic who disagrees with the court’s finding or the definition.