Expert Article Library

Challenge to Accounting Expert's Written Report

Case Name: Thompson v. Doane Pet Care Co. (Click here for the full text of the case)

Court: United States Court of Appeals for the 6th Circuit; on appeal from District Court for the Middle District of Tennessee at Nashville

Date: December 15, 2006

Expert: Accounting Expert. Von A. Harshman, C.P.A.

Issues: Did the district court err in finding the evidence of an accounting expert inadmissible because the expert failed to recite in his written report that his opinion was based on “generally accepted accounting principles” (language specifically recited in the contract between the parties).

Summary of case: This case involved an accounting of Thompson’s interest in a company. The plaintiff, Thompson, and defendants had started a company together. Thompson’s employment contract stated that if Thompson was fired without cause, the company was required to buy his interest in the company based on an earnings formula calculated according to “generally accepted accounting principles.”

Role of the expert: The expert provided evidence of the value of Thompson’s interest in the company.

Challenges to the Expert's testimony: The expert’s testimony was challenged because in the required written report the expert failed to state that his opinion was based on “generally accepted accounting principles.” The Court of Appeals held that the expert’s testimony was not inadmissible merely because he failed to use the words “based on generally accepted accounting principles.” The Court stated (dicta) that it can generally be assumed that C.P.A.s base their calculations on the standards common to their profession; that is, upon generally accepted accounting principles. The case was remanded for a new trial on the question of the value of the plaintiff’s interest in the company.

Summary prepared by R. Zapparoni