An economic loss analysis should be done by an economist, shouldn’t it?

Not necessarily.

Choosing an economist to conduct economic loss analyses might seem an obvious choice, but there are several reasons why choosing a CPA may make more sense.

CPAs often have extensive experience in prospective financial reporting in which expected results of future operations are analyzed and presented to financial statement users.

The knowledge of which assumptions may affect future financial projections – and how to explain the significance of each assumption – can prove invaluable when the economic analysis is ever presented in court.

The study of discounted cash flow techniques, which are critical to the determination of economic losses, is part of every CPA’s training. Although the CPA may lack the extent of training in macroeconomics that an economist may possess, the CPA will possess the level of skill required for almost all economic loss analyses.

Even so, you may ask, why not use an economist for an economic analysis?

CPAs are generally regarded as excellent independent sources of objective information on matters that can be expressed in financial terms. Many academic economists, while completely independent and objective, may nonetheless earn more than half their annual income from testifying as expert witnesses.

In contrast, a CPA firm may offer experienced partners and managers as economic loss experts who have more diversified sources of income. CPAs who serve as economic loss expert witnesses offer the intangible benefit of not appearing to be “hired guns.”

Expert witnesses are teachers, and jurors will often look to the expert to teach them about complex issues that jury members must come to understand to adequately discharge their responsibilities.

The experienced CPA has spent years explaining complex issues of finances, tax law, regulatory issues and the like to clients who, like the jury, desperately need to understand those complexities.

An experienced CPA has developed practical approaches to explaining financial complexities in lay terms, is perceived as objective and independent, and has sufficient training to handle a wide range of economic loss analyses.