Role of an Expert Witness in Fraud Determination
My general role as a potential expert witness involved in this matter
A witness is a person who testifies in the court of law. An expert witness is therefore an individual who testifies in the court of law because the individual is believed to be an expertise in the matter of interest (McKendrick,2014). The whole incidence involves determining the work of forensic accountant .Generally forensic accounting involves application of appropriate techniques that focuses to undertake acceptable concepts needed in carrying out legal claims. It mostly occurs due increased claims in business such as embezzlement of financial funds and increased illegal business within the market place.
In the case the role of the expert will comply with the function of the forensic accountant in fraud determination. The expert will assist in providing all the relevant information that will guide in trial.
Role of the expert in the trial.
- Carrying out the litigation process in the business. The expert will give any documentary evidence which shows that PEL was involved in providing the XY256 chemical additive to the AIH. The document gives the evidence that will support or assist in rebut of the claim in the court(Singleton & Singleton, 2010).
- Assisting in fraud detection. The expert will provide appropriate questions on why the PEL decided to use the defective chemical to the AIH.The court will rule in favour of the evidence about the use of defective XY256 chemical additive.
- Giving the court the evidence on the use of XY256 chemical additive. The expert provides samples from the CF which they claimed had the XY256 chemical additive.
- Preparing a balanced report that accounts for the use of XY256 chemical additive. It is based on thorough examination carried out by the expert regarding the supply of XY256 chemical additive by PEL.The report gives the reasons why PEL tried to use the chemical knowing that it will cause damages to the candles produced by the AIH.
- Investigating the major claims based on the customer fraud.CF got claims from their customers complaining for the use of XY256 chemical additive. Therefore the expert in the court will try to table all documentaries revealing the use of XY256 chemical additive by the AIH(Modugu & Anyaduba,2013).
- Collecting relevant data regarding the supply of defective chemicals by the PEL.The expert will help the AIH in the court by giving apt data which shows that PEL was involved in illegal business. The compensation will be guaranteed to both CF and AIH if only the expert tables the apt evidence in the court (Cain, 2014).
- Review on the claims to arise based on the facts at hand
One of the claims that would obviously arise from this issue is that AHI would try to sue PEL for the damages that it has incurred as a result of the XY256 chemical additive that caused an unpleasant odor to be produced some hours eight hours after it had already been used from the candle residue. Well, this particular claim is not a breach of contract but rather a mere tort claim (Low, Bordia, Bordia, 2016). It is a tort claim that seeks to obtain what can be regarded as a civil remedy, for instance the damages that AHI suffered after losing its main customer and the safe environmental disposal issue (Branson, 2011).
Another possible claim is that CF would try to sue AIH for the damages caused by the supply of the materials containing this XY256 additive. Well, this particular claim is a direct breach of contract (Faure & Luth, 2011).It is so because initially, they had received several complaints regarding the products that had this chemical additive but did not take any action. Later in the year CF terminates the contract and returns the remaining stock.
AHI may also decide to sue CF because of the immediate cancelation of the contract that the two parties had. In as much as this incident may be regarded as a breach of contract by CF, AHI might interpret it much more differently. For instance they may regard it as a common mistake that was made by both parties in the contract therefore cancelling the contract without any breach would be an offense (Rose, 2013).
Types of Claims that may Arise in Forensic Accounting Trials
Steps I would take to quantify each element of the claim in regard to AHI’s potential claims against PEL
One of the potential claims that would rise between AHI and PEL is that AHI would sue PEL for providing them a chemical additive XY256 that produces and unpleasant odor after use when incorporated in candles. Looking at this claim we see that AHI suffered a tremendous amount of loss.
Despite the huge amount of loss and damage suffered by AHI, there is an important element about this claim that we need to look at and this is the fact that when the two parties were getting into the contract they all had no idea on whether the additive had the effects that triggered the damages that befell AHI. Well, according to the elements of any contract there has to be an offer and an offer is required by law that it contains all the terms and details (Schmidt & Silkens, 2015). The terms can be either defined or implied. For this particular incidence, PEL should have disclosed all the contents and characteristics of the additive XY256 to AHI before getting into an agreement. This was not the case, however. So in as much that PEL had no idea about this particular aspect about this chemical additive this element needs to be looked at with greater understanding and deeper interpretation.
An overview on financial or other information that would be of assistance in determining the amount of loss suffered
From the claims of AIH we see that the company suffered a lot (Ayres, 2012).PEL involvement in supplying the XY256 chemical additive led to disturbance in the AIH operations. Therefore from the claims, AIH can provide any financial information regarding the losses incurred which includes;
Firstly on the claim regarding the damages resulting from use of XY256 chemical additive by AIH.Here the AIH can provide the income statement which is commonly known as the profit or loss statement. The list will include the operational expenses incurred by the AIH when ordering the XY256 chemical additive from the PEL.Through the list then AIH will be in position to give adequate evidence that will help in assessing the compensation margin. It provides the revenue and expenses experienced by the AIH when manufacturing products containing the XY256 chemical additive (Ayres, 2012).It provides the evidence on transaction details traced on daily basis. This is to suggest that the expert used in the claim will have enough evidence on the supply of XY256 chemical additive by PEL to AIH.
Steps to Quantify the Elements of the Claim
The second financial information to be useful to the AIH is the statement of cash flows. The list contains all the details on cash AIH Company engaged on selling the candles to the CF.Through use of the list AIH will be information to give a complete expense incurred in using XY256 chemical additive when manufacturing candles (Pfander, 2011). It contains all transactions resulting to use of money in buying the XY256 chemical additive from PEL.
Thirdly will be the use of receipts used by the AIH in selling candles to the CF.Receipts gives enough evidence on losses incurred by the AIH in selling candles manufactured by use of XY256 chemical additive from PEL.The total expense is calculated and then loss from use of XY256 chemical additive from PEL is recorded and submitted to the PEL for immediate compensation.
The other financial information giving losses incurred by AIH will be from the use of balance sheet. It provides an overview of the available stock details (Schmidt & Silkens, 2015) .The company gives the total stock of the candles manufactured using XY256 chemical additive from PEL.The loss is identified and then AIH is compensated appropriately whereby it will be based on total stock purchased by CF plus the available stock in shelf.
References
Ayres, I., & Ayres, I. (2012). Studies in Contract Law. Foundation Press.
Branson, D. M. (2011). Holding Multinational Corporations Accountable-Achilles’ Heels in Alien Tort Claims Act Litigation. Santa Clara J. Int’l L., 9, 227.
Cain, T. (2014). Third Party Funding of Personal Injury Tort Claims: Keep the Baby and Change the Bathwater. Chi.-Kent L. Rev., 89, 11.
Faure, M. G., & Luth, H. A. (2011). Behavioural economics in unfair contract terms. Journal of Consumer Policy, 34(3), 337-358.
Low, C. H., Bordia, P., & Bordia, S. (2016). What do employees want and why? An exploration of employees’ preferred psychological contract elements across career stages. Human Relations, 69(7), 1457-1481.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Modugu, K. P., & Anyaduba, J. O. (2013). Forensic accounting and financial fraud in Nigeria: An empirical approach. International Journal of Business and Social Science, 4(7), 281-289.
Nystén-Haarala, S., Lee, N., & Lehto, J. (2010). Flexibility in contract terms and contracting processes. International Journal of Managing Projects in Business, 3(3), 462-478.
Pfander, J. E. (2011). Resolving the Qualified Immunity Dilemma: Constitutional Tort Claims for Nominal Damages. Colum. L. Rev., 111, 1601.
Rose, F. (2013). Terms of the Contract. In Marine Insurance(pp. 259-290). Informa Law from Routledge.
Schmidt-Kessel, M., & Silkens, E. (2015). Breach of Contract. In European Perspectives on the Common European Sales Law (pp. 111-135). Springer, Cham.
Singleton, T. W., & Singleton, A. J. (2010). Fraud auditing and forensic accounting (Vol. 11). John Wiley & Sons.
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