• Becky Seidler, Author |
5 min read

This post was prepared in collaboration with Michael Sisti, a manager in the KPMG in Canada Forensic & Dispute Advisory practice.

Accountants and business valuators are often called on to assist in litigation, particularly where expertise is required in performing financial analysis, loss quantification and business valuations. Think such contexts as shareholder disputes, class actions and other commercial disputes. In this role as an “expert witness” recognized by the Court, the professional’s responsibility is to use their specialized knowledge to provide an objective assessment of loss incurred by the parties to assist the Court in resolving the dispute.

The rapid advancement of predictive and generative artificial intelligence tools like ChatGPT and other automated software that purports to perform various valuation analyses (collectively, “AI tools”) is disrupting the field of loss quantification. These tools can enhance an expert witness’s ability to perform traditional tasks with an innovative approach that can improve efficiency and quality of work. However, as discussed in this post, these technologies are not a substitute for the expert witness’s knowledge and risks can arise from relying too heavily on AI tools.

Advantages of AI integration in the loss quantification process

Because of AI’s ability to solve problems and streamline everyday activities, this technology is quickly being adopted to assist expert witnesses in performing their work. A few examples:

Research on the market and industry. AI’s access to extensive databases can assist expert witnesses in performing research and gathering information, allowing the expert witnesses to quickly gain knowledge relevant to the specific loss quantification or valuation issues being assessed.

Data summarization and analysis. AI tools can help with condensing large volumes of data and text in a simplified format in a fraction of the time that it may have taken historically. The ability to efficiently review and analyze documents helps streamline routine tasks, freeing up professional time. Additionally, the use of AI and machine learning in automated valuation software can provide opportunities for expert witnesses to use analytical techniques such as predictive analytics and scenario analysis in performing valuations.

Enhanced communication and report writing. AI tools can help improve the quality and understandability of client deliverables by assisting with drafting text, proofreading and providing other editorial suggestions.

Risks of overreliance on AI tools

Along with the benefits of AI tools come certain risks that professionals are currently facing in the adoption of this technology. These include:

Accuracy of information. AI tools should never be used as the sole source of information. There have already been real-world examples of professionals using AI tools that have generated incorrect or fabricated information, a phenomenon referred to as "hallucinations.” If not caught, relying on these outputs could severely hinder the quality of the expert witness’s output, damage their professional credibility and lead to potential liability.

Accountability. Professionals are held responsible for their work product, irrespective of whether it was generated with the assistance of AI. Many loss quantification practitioners are also members of professional institutions that have standards and a required level of care. Application of these standards must be done by a qualified professional, with appropriate experience, training and professional judgement.

Data privacy and security. AI's handling of sensitive information raises privacy and security issues, as well as concerns with respect to potential data breaches. This is heightened when dealing with highly confidential and often competitive data in, for example, a business valuation context.

The role of the expert witness

When expert witnesses are qualified by the Court, certain traits explicitly cannot be replaced by AI tools, including:

Formal training. While AI tools can learn with every interaction, loss quantification and business valuation are not simply automated tasks that can be programmed. Accountants and business valuators undergo rigorous formal training and qualification programs that provide them with a deep understanding of business valuation principles, methodologies and standards—all of which should be incorporated into the use of AI tools.

Real-world and practical experience. Expert witnesses bring invaluable real-world and practical experience to the table. With this experience comes a thorough understanding of market- and specific industry- and company nuances that drive loss quantification approaches. This knowledge is gained over time through unique experiences, the absence of which could lead to flawed conclusions.

Professional judgement. This is a critical aspect of a loss quantification professional’s role. When they are called to be an expert witness, it’s essential they apply their own professional skepticism to the output of AI tools. Ensuring there is a qualified professional to apply independent judgement and expertise enhances the quality of an expert witness’s opinions, which benefits the practitioner, the client and ultimately the Court. 

Standards first, and always

The integration of AI tools at their current capacity is helping expert witnesses provide better results, and this is just the beginning. However, it’s important to remember that in addition to fulfilling their duties to the Court when qualified as an expert witness, accounting and business valuation professionals also have a responsibility to abide by their relevant professional codes of conduct and practice standards.

These standards are grounded in the fundamental principles of performing professional services with integrity, good faith and due care, regardless of what tools may be used. Incorporating AI tools into loss quantification and business valuation requires a balanced and thoughtful approach while maintaining essential human oversight. While AI tools offer significant advantages and can save professionals time, their optimal use is to complement but not replace the experience, skills and professional judgement of an expert witness.

Multilingual post

This post is also available in the following languages

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today