There is extensive discussion on EFATO in the " dangers of multi instruction" thread further down this forum section. I cut and pasted part of one of my posts that may be of interest to you.
One point nobody has addressed yet is the point that a mixture cut simulates a instant total engine failure. However I think this is the least likely failure scenario in a light twin. A slow run down in power and/or rough running caused by internal mechanical failure or a ignition problem , or a surging engine caused by a fuel problem is IMO a more likely real world event.
Yet from what I have seen many students complete the multi rating course with out any exposure to these situations.
When I teach the muti rating I always make sure to distract the student when the aircraft is in a turn and then slowly pull the inside throttle back. I also hide the quandrant on final approach and reduce power on one engine. These exercises provide a good example of ther fact that a engine failures can be subtle and the massive yaw experienced with a high power low airspeed rapid throttle cut is not the only way engines fail.
To simulate a surging engine I cover the throttle quadrant and then rapidly move one throttle back and forth from idle to cruise. This demonstrates that with a surging engine, It may not initially be obvious which engine is acting up. Careful observation of the engine quages is vital before any actions are taken.
Finally one of my concerns with the standard multi curiculum is that the prop overspeed scenario seemes to be at best glossed over. A prop overspeed could cause a yaw away from the malfunctioning engine, so instead of reducing power and airspeed and flying away on two engines the pilot could feather the good engine and crash. This execise is very difficult to simulate in flight. The best I have come up with is to cover both RPM guages . hide the quandrant with my clipboard and reduce the RPM on one engine to the minimum allowed. I expect the student to call " suspected prop over/underspeed", point to the RPM guages and verbalize his corrective actions. Its not a great exercise but at least it does provide the tactile cues of yaw combined with the sound of the engines going massively out of sync, and will hopefully mean the student will not consider every power abnormality only within the context of a engine failure.
I believe the instructor must adequately prepare their students for the real dangers of multi engine flight, but in a way that does not put the instructor or the student deliberately in danger.
Finally I bet that virtually all those instructors who do mixture cuts at takeoff are low time themselves and have probably
little or no time as a working line pilot. I tell all my students that the yellow stripe down my back has gotten a lot bigger since I started flying 27 years ago