A Forensic Accountant needs a comprehensive knowledge of accounts, financial and business transactions combined with analytical and interpretive skills, direct involvement, ability to meet the requirements of the case and deadlines, a cost effective approach, the ability to produce a clear relevant independent report complying with the relevant CPR and to give evidence in Court and cope with the rigours of cross examination.
Some examples of the type of cases that our firm have acted on are:-
An MBO by a one third director shareholder of the other two one third director shareholders. Completion had been agreed by fax late on Friday afternoon when it was too late to transfer funds. The partner had already left for the bank holiday weekend so an assistant accepted completion subject to agreeing payment of interest up to Tuesday. On Saturday the purchaser director received information that a major customer had been lost and pulled out of the deal.
The vendors sued their solicitors on the basis that completion had taken place and that they had suffered loss due to the greatly reduced value of the company. The case went to trial in the High Court in London with the main issues being whether or not completion had taken place and if so the amount of loss suffered. Acting for the Defence, apart from evidence on the practical position, we had to value the company following the change in circumstances both with and without a minority interest, assess the value of security and value loan notes on a discounted basis. The case was decided in favour of the Defence, both on quantum where the Judge gave his assessment first and on causation.
The client company was supplied with faulty goods which it used in its manufacturing process, resulting in faulty goods (custom built exhibition stands), being supplied to customers as the faults did not become apparent until later when the goods were in use. Acting for the Claimant, we had to assess and quantify the losses suffered by the company which in our view were in respect of:-
- The time and costs involved in identifying and solving the problem.
- The cost of rectifying faulty items.
- The cost of the faulty materials.
- Compensation paid to customers.
- Loss of business and goodwill which was the most difficult area to assess.
The matter was settled at Mediation, with the Claimants receiving fair compensation.
Our usual involvement in matrimonial eases is where a private company is one of the major assets and income source and the company has to be valued and the ability to extract income or capital assessed, sometimes looking for disappearing income or funds.
We had an unusual case where acting for the widow and second wife of a wealthy businessman who had died. She was left with relatively little, partly by the terms of his will and partly by actions of his children in relation to the family business, pension rights and trusts. Action was taken under the Inheritance Provision Act.
Acting for the Claimant, we had to value the company, investigate the dealings on the pension scheme and on the trusts, arrive at the effective total value of his assets for the purposes of the Act, advise on the tax situation and how matters could most efficiently be dealt with, so that a fair share for the widow could be assessed. We were able to do this and were told by our instructing Lawyers that our report was a bombshell to the Defendants and their Lawyers. The matter was settled at Mediation with the widow receiving a fair settlement.
This was a Crown Court fraud trial relating to a director, minority shareholder accused of fraud against a major supplier and customer, in conjunction with a director of that company. The other director had already been convicted of fraud against his international company.
The basis of the Defence, for whom we were acting, was that the Defendant and his company colleagues knew nothing of the fraud, entered into transactions with someone that they were used to dealing with, supplied cash for subcontractors, as they had in other cases, had made their usual profit margin on the jobs and had dealt with the transactions correctly. We had to examine the transactions in detail and report on whether they were correctly recorded in the company's records and accounts, correctly dealt with for VAT and Corporation Tax and that the director had derived no personal direct benefit from the transactions, all of which we were able to do. We also had to look at and comment on how the transactions were dealt with in the other company's records and their very poor internal control procedures for verifying and authorizing transactions.
After a fairly grueling cross examination our evidence was upheld and the Defendant cleared.
This was a fraud against an Insurance/Investment company by an individual who discovered by accident, that he could "fix" the time on fax instructions so that he could buy or sell units after he knew how they were performing and make guaranteed profits.
He pleaded guilty so that the case was all about the level of compensation to the insurance company and the Confiscation Order under the Proceeds of Crime Act. The prosecution claimed that the Defendant should pay both £4.5m compensation and £5.5 confiscation, with the bonds being worth some £4.5m and using his other assets, property and investments to pay the balance.
Our first task was to correct the figures being claimed for compensation to £3.5m and confiscation to £4.5m and to point out that cashing the bonds, as was being proposed, would attract tax of £lm, which should either be taken into account in the compensation figure or that this should be dealt with by the insurance company taking back the illegal profit direct from the bonds so that tax was not a consideration.
The next task was to show that the Defendant’s other assets were not derived from crime and that the compensation should be paid first with confiscation only being paid to the extent that there was a balance of value left in the bonds, some £lm. This would leave the other assets for the Defendant’s now divorced wife and family.
At a hearing before a High Court Judge in London, he found in the Defendant's favour.
Expert Independent Determination
We were appointed by the ICAEW under the terms of a contract to act as Independent Accountant to Determine a large financial dispute between a District Council and a Contractor. As is usual, operating to our timetable, both parties made their submissions and then their responses. In this case, due to the complexities, they were both given the opportunity to make a further response and then asked to respond to our points/questions. After a detailed review of the figures, the basis of both parties’ position and considering the relevant factors, the Determination was made.
Valuations of Businesses in Dispute Situations. This can be Professional Negligence, Shareholder Disputes, Partnership Disputes, Matrimonial Disputes, Probate, HMRC, Company Commercial Disputes and once, a Murder Trial.
A recent valuation that we carried out was in respect of a very profitable and rapidly expanding UK company selling top up Health Insurance in France to French Citizens. This had all the normal aspects of a valuation with the increased difficulty of arriving at maintainable profits where these had increased so quickly and substantially, with the added factor of how this would be affected by increases in insurance taxes and a large unknown, the effect of BREXIT!