Forensic Accounting – What can it uncover?

Posted On February 8, 2017 By mhauk

Forensic accounting is another area where accountants can provide expert support and advice.

Forensic accounting is the investigative process by which financial information is gathered, analysed and presented in a clear, unambiguous way, with conclusions as to events and outcomes. It is similar to a due diligence process, although the scope is often narrowed to a particular area of concern, which is investigated in much more detail, rather than a broader investigation into areas of potential risk. Common situations for engaging a forensic accountant include suspected theft or fraud, insurance claims for loss of earnings e.g. from a fire, or the losses incurred with the breach of a non-compete clause.

The process is not always in connection with a court case, but if there is the potential that legal action may result, it is worth seeking an expert with experience and who understands the processes required under the Civil Procedure Rules.

The initial investigation process can assist with the following:

  • Gathering evidence which may be required for a later court case
  • Analysing information and presenting it in an easy to understand manner
  • Providing clear statements of opinion on events and their financial impact
  • Making suggestions of next steps and potential actions

The exercise could be undertaken on behalf of either party, or jointly agreed between them as part of a more formal process.

Once the report is presented to the instructing party/parties, it may then be called upon in any court action. The investigating accountant can then assist the litigation process in the following ways:

  • Providing expert testimony in court
  • Support in formulating questions for other witnesses on the financial information
  • Review of other witness expert reports and providing comment
  • Potentially preparing a joint expert statement with the opposing expert to explain areas of similarity and areas of difference
  • Providing guidance on settlement discussions and the calculation of damages

It is important that the forensic accountant is provided with access to all information required and that they use that information to form their professional opinion on the events and their implications. Key to the quality of a report in a case, particularly one that proceeds to court, is the presentation of this professional opinion as this is the area where an expert truly demonstrates their value.

If you have any questions or would like to discuss our Forensics services in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Forensics team.

This article originally appeared on the blog of our member firm, Broomfield & Alexander.