Page 19 - Economic Damages Calculation

Chapter 2

Client-Supplied Information fn 1

Introduction

Practitioners regularly obtain client-supplied information which is used and relied upon in performing
professional services — including assurance, tax, and consulting services. A litigation services engage-
ment, a type of consulting service, is no different. Damages experts often rely upon information supplied
by client management or other company personnel when performing economic damage calculations.
Such information can take a number of different forms, including, but not limited to,

• projections of financial performance — including lost revenues, associated costs, loss of value,
out-of-pocket costs, and so on;

• assumptions regarding growth rates, pricing, financing opportunities, and cost structure;

• business information — such as markets served, competitors, market share, and industry trends;
or

• technical information — such as product features and specifications, and how those features and
specifications contribute to the operation of a product.

While damages experts may rely on client’s representations and information as part of the normal deliv-
ery of professional services, it should not be done without appropriate consideration. As reflected in the
cases presented in this chapter, a damages expert’s reliance on client-supplied information is frequently
an issue subject to challenge in litigation. Numerous court opinions address the issue within the context
of the evaluation of the admissibility of expert testimony, and within the context of the evaluation of the
weight that should be accorded to the expert opinions regarding damages.

The cases further suggest the courts consider a number of key issues when evaluating the admissibility
and weight of the expert testimony, including but not limited to

• the qualifications of client personnel supplying information;

• expert acceptance of client data, with and without testing;

• the reliability of projections provided by the client;

fn 1 This practice aid uses both client and management to refer to representatives or individuals of organizations, or an individual in
their capacity as a party to a dispute that may interact or otherwise provide information to experts. The use of the word information is
intended to be inclusive of data, documents, verbal discussions or other information an expert might consider. This chapter does not
address an expert’s reliance of information provided by another expert.

© 2020, Association of International Certified Professional Accountants 17