You have been hired to provide expert testimony for the Pura company, a national retailer of consumer hardware goods. Pura suffered a $2 million embezzlement loss. The problem is that the loss was supposed to be covered under the employee theft coverage in Pura’s insurance policy; however, the insurance company refused to pay. This all happened despite the fact that you performed a six-month investigation and found plenty of evidence that suggested fraud. The insurance company pointed out that the police were unwilling to charge anyone with the crime, so it felt compelled to continue its own investigation, which appeared to be just an excuse not to pay.

Pura suffered considerable consequential damaged as a result of the loss of funds and available cash flow. Net income dropped in half in the subsequent eight quarters and eventually Pura suffered total financial collapse.

Pura won its lawsuit against its insurance company. The judgement was favorable for deceptive trade practices, breach of contract, and bad faith. After the trial, the judge ordered both sides to prepare briefs regarding the consequential damages. However, Pura was completely out of money and was still unable to collect the insurance because of pending appeals.

Pura has asked you to assist in preparing a case for consequential damages based on a total loss of the business. You know that unless you provide such assistance, there is little chance that Pura will ever have the funds to pay you the six-digit bill in fees that it owes you, but your specialty is fraud and not business valuation. Still, you are a CPA, and you can certainly argue that, based on that credential alone, you are qualified to testify.

Required: should you assist in providing expert testimony regarding the consequential damages?

Answer rating: 100% (QA)

Accountants may decrease the danger of financial disaster by having a client acceptance policy They should reject customers who can harm their profess... View the full answer