Fraud Advisory Services

First Stage Investigation Service (FSI)

Experience has shown that there are a vast number of smaller frauds being perpetrated which are not being investigated or dealt with in any satisfactory way.  These are frauds such as employee thefts or rip offs by suppliers such as builders where the financial loss may only be several £thousands.

Such losses can be serious for individuals or small businesses but often do not command the attention of the fraud investigation regulators who simply do not have the resources to deal with every fraud that is reported to them.  Very often they will ask for more proof or a better prepared case summary.

An alternative solution is to investigate the loss and commence civil litigation against the thief.  However, this is generally recourse when large sums have been lost as the legal and accounting costs are almost certainly going to be prohibitive.  It has been said that formal civil asset recovery through the courts is only worth while when sums of over £1,000,000 are being chased.

So what is the solution when your bookkeeper steals £10,000 from your business or your builder says you owe him another £20,000 to finish off the job after he has spent the agreed price?  Fraud Advisory Services recognises that these cases need a cost effective solution – to ensure a sensible and proportionate chance of getting your money back or ensuring that the authorities investigate so that you can make a claim for recompensing your loss.

A First Stage Investigation can achieve the following:

• By discussing the case with you and acting as a sounding we can help you to focus your thoughts and understand what options are available to you;
• All information sources will be considered and correlated as we asses the case, establishing the method and extent of the loss;
• The case assessment will be a presentation of the evidence in a format based on forensic accounting principles that can be presented to the authorities.  This is often all they require to commence a formal enquiry which can lead to prosecution, asset confiscation and open the avenue for you to make a victim compensation claim;
• The case assessment can be persuasive in achieving a negotiated settlement – thus avoiding expensive and lengthy litigation.

Example 1 – Employee theft

The case is evaluated and an assessment presented.  With your agreement a letter is sent to the fraudulent employee and another to the police.  The situation is safely contained and it will be possible to dismiss the employee with enough evidence for gross missconduct without fear of employment tribunals.  Negotiations may retreive the losses by negotiation with the fear of a pending criminal investigation (the police may decide not to pursue the matter if recompense has been made as it would not necessarily be in the public interest)

Example 2 – Minority Shareholder at a Disadvantage

The directors wind up a business in which you have a minority interest.  Your minority shares become worthless.  You then discover that the directors have started up in business again from the same premises and using the same assets selling to the old customer base.  The case is investigated and evaluated resulting in an assessment which will include a overview of the valuation of your shares and indications of any insolvency offences that may have been committed - with your permission letters are sent to the Insolvency Service and the directors.  The assessment can be used as pressure and quantification for you loss of share value.

Important Note – Using Specialist Fraud Solicitors

A very good solution when victim of a fraud is to approach a solicitor.  However, as all forensic accountants are not fraud experts, not all solicitors are capable of dealing with a fraud.  In many cases the right result may be achieved – but at great cost.  It is a legal lottery and in most cases it is better to only appoint a lawyer who is specifically experienced in the work required.

Fraud Advisory Services does not give legal advice.  For this reason we often work alongside lawyers investigating frauds and recovering assets.  As part of our First Stage Investigation we will review your need for legal advice if you have not already appointed solicitors.  Then, we will help you with your choice of firms and individual solicitors and ensure that your instructions to them are as specific as they can be to ensure that the costs are minimisied.

The cost for a First Stage Investigation is as follows:

• £1,200 + VAT – Basic service
• £1,500 + VAT – Basic service & ongoing telephone support
• £2,000 + VAT – Basic service including UK meeting & ongoing telephone support

The basic service includes telephone discussions, receipt of  any documents by electronic mail and assessment of the information received – leading to a report in the format of a letter to you setting out the quantum and details of the loss in a format that can be presented to the police, lawyers or perpetrators as you wish.  Also included is conveying extracts of the findings on your behalf to these parties and initial contact at your instruction where appropriate.

As a typical financial investigation by a forensic accountant can cost anything upwards of £10,000 and often much much more, we feel that First Stage Investigation offers the possibility for a cost effective solution in certain cases where formal legal, investigative and accountancy instructions would simply be too expensive.  If such an investigation becomes necessary, the initial work in a First Stage Investigation will of course count within a full blown asset tracing and recovery excercise.  Please contact us to discuss whether or not this service is appropriate for your case.

A forensic audit is an investigation conducted by forensic accountants. It is almost certainly going to be a fraud investigation – either investigating a suspected fraud or checking to see if an organisation may be suffering from fraud or even just at risk of becoming a victim of fraud.

A forensic audit differs from a statutory audit because there is no prescribed outcome – in a statutory audit sufficient checking and verification work is carried out to ensure that a set of financial statements is “true and fair”. In practice this means that the financial statements comply with accepted accounting methods and principles and are not materially wrong. This does not meant that they do not contain errors and instances of fraud – just that their appearance is good enough for the rader to understand the general financial position and results from them.

Many organisations suffer frauds that span several years of successeful audits – a forensic audit will give a better chance of detecting frauds or weaknesses that will allow frauds – but even it can never be a 100% guarantee. This is because the fraudster is spending 24 hours a day, 7 days a week seeking the weeknesses in the business – to exploit. So while a forensic audit will look in a more detailed way in areas that are prone to attack by the fraudster, a fully protected organisation will need to implement an appropriate fraud policy and maintain a fraud review process on an ongoing basis if it wants to reduce its risk of succumbing to as little as possible.

A fraud audit is generally carried out by a more experienced and specialist accountant than would be the case for the statutory audit. The best forensic auditor will be a seasoned forensic accountant specialising in fraud, and though may be assisted by junior accountants in the routine checking work being carried out, will rely very much on an intuitive approach and an awareness of the fraudster’s psychology and methods of operation.

A forensic audit will focus on certain areas that are vulnerable to the attention of the fraudster. This will include analysing the trail of money as it enters the organisation, is process and then disbursed. It will look at the way in which payments are made to both suppliers and staff, and the way that any managers or directors may be in a position to abuse trust placed in them or collude with others to defraud.

Very often a forensic audit in very large companies can be efficiently run by employing a fraud expert to oversee work carried out by junior staff, though care is always taken to ensure that there is no possibility that the person committing the fraud could be allowed to unknowingly assist with the forensic audit! For example, it would not be prudent to allow the wages clerk to assist with the audit of the wages function! This sensitive area must be looked at solely by an independant forensic accounting expert.

A forensic audit is normally commissioned by owners of a business who are unhappy with the management, and want the running of the business checked by an outside expert. The regular auditors or accountants will be too close to the management of the company in any case and would not necessarily possess the required skills.

Knowing want is wanted from the audit is the best way to get the best from an expert accountant employed to investigate an organisation. It may be that the owners or managing director have received a tip-off that the finance director has been stealing. They might have noticed that he was driving a flashy new car and was taking expensive foreign holidays too frequently. Focusing investigations in this way are much better and more cost effective than general fishing expeditions – but must be carried out sensitively and with due attention to contractual obligations and employment law restrictions.

First Stage Investigation Service (FSI)

Experience has shown that there are a vast number of smaller frauds being perpetrated which are not being investigated or dealt with in any satisfactory way.  These are frauds such as employee thefts or rip offs by suppliers such as builders where the financial loss may only be several £thousands.

Such losses can be serious for individuals or small businesses but often do not command the attention of the fraud investigation regulators who simply do not have the resources to deal with every fraud that is reported to them.  Very often they will ask for more proof or a better prepared case summary.

An alternative solution is to investigate the loss and commence civil litigation against the thief.  However, this is generally recourse when large sums have been lost as the legal and accounting costs are almost certainly going to be prohibitive.  It has been said that formal civil asset recovery through the courts is only worth while when sums of over £1,000,000 are being chased.

So what is the solution when your bookkeeper steals £10,000 from your business or your builder says you owe him another £20,000 to finish off the job after he has spent the agreed price?  Fraud Advisory Services recognises that these cases need a cost effective solution – to ensure a sensible and proportionate chance of getting your money back or ensuring that the authorities investigate so that you can make a claim for recompensing your loss.

A First Stage Investigation can achieve the following:

• By discussing the case with you and acting as a sounding we can help you to focus your thoughts and understand what options are available to you;
• All information sources will be considered and correlated as we asses the case, establishing the method and extent of the loss;
• The case assessment will be a presentation of the evidence in a format based on forensic accounting principles that can be presented to the authorities.  This is often all they require to commence a formal enquiry which can lead to prosecution, asset confiscation and open the avenue for you to make a victim compensation claim;
• The case assessment can be persuasive in achieving a negotiated settlement – thus avoiding expensive and lengthy litigation.

Example 1 – Employee theft

The case is evaluated and an assessment presented.  With your agreement a letter is sent to the fraudulent employee and another to the police.  The situation is safely contained and it will be possible to dismiss the employee with enough evidence for gross missconduct without fear of employment tribunals.  Negotiations may retreive the losses by negotiation with the fear of a pending criminal investigation (the police may decide not to pursue the matter if recompense has been made as it would not necessarily be in the public interest)

Example 2 – Minority Shareholder at a Disadvantage

The directors wind up a business in which you have a minority interest.  Your minority shares become worthless.  You then discover that the directors have started up in business again from the same premises and using the same assets selling to the old customer base.  The case is investigated and evaluated resulting in an assessment which will include a overview of the valuation of your shares and indications of any insolvency offences that may have been committed - with your permission letters are sent to the Insolvency Service and the directors.  The assessment can be used as pressure and quantification for you loss of share value.

Important Note – Using Specialist Fraud Solicitors

A very good solution when victim of a fraud is to approach a solicitor.  However, as all forensic accountants are not fraud experts, not all solicitors are capable of dealing with a fraud.  In many cases the right result may be achieved – but at great cost.  It is a legal lottery and in most cases it is better to only appoint a lawyer who is specifically experienced in the work required.

Fraud Advisory Services does not give legal advice.  For this reason we often work alongside lawyers investigating frauds and recovering assets.  As part of our First Stage Investigation we will review your need for legal advice if you have not already appointed solicitors.  Then, we will help you with your choice of firms and individual solicitors and ensure that your instructions to them are as specific as they can be to ensure that the costs are minimisied.

The cost for a First Stage Investigation is as follows:

• £1,200 + VAT – Basic service
• £1,500 + VAT – Basic service & ongoing telephone support
• £2,000 + VAT – Basic service including UK meeting & ongoing telephone support

The basic service includes telephone discussions, receipt of  any documents by electronic mail and assessment of the information received – leading to a report in the format of a letter to you setting out the quantum and details of the loss in a format that can be presented to the police, lawyers or perpetrators as you wish.  Also included is conveying extracts of the findings on your behalf to these parties and initial contact at your instruction where appropriate.

As a typical financial investigation by a forensic accountant can cost anything upwards of £10,000 and often much much more, we feel that First Stage Investigation offers the possibility for a cost effective solution in certain cases where formal legal, investigative and accountancy instructions would simply be too expensive.  If such an investigation becomes necessary, the initial work in a First Stage Investigation will of course count within a full blown asset tracing and recovery excercise.  Please contact us to discuss whether or not this service is appropriate for your case.

A fraud can be uncovered in a number of different ways. A good example is by a whistleblower who who might inform his managers that a colleague has been fraudulently stealing from the company. Such a corporate fraud will need to be investigated in order to prevent further losses, find out how it happened in the first place and to try to recover where possible any losses that have occurred.

A specialist fraud investigator is needed for such a task and it is very common for the victim company to enlist the assistance of a qualified forensic accountant. Such a person will be accredited to investigate a fraud and may be a Chartered Accountant or a Certified Fraud Examiner with possibly other qualifications together with years of experience dealing with such cases.

Every fraud is different. There are different characteristics to be found between bank fraud, supplier fraud and mortgage fraud. Even within these categories there are many possibilities because the fraudster is very resourceful in seeking out new and different weaknesses in a business.

The investigator will approach the corporate fraud by first determining what the organisation wants to achieve. This might be only to get the money back or it might want to make an example of the fraudster as a lesson to others. If it only wants to get its money back it may not want law enforcement involved as this might disrupt its business or cause its reputation to be damaged. For example a bank might not want the general public to know that it had allowed a fraudster to work in its midst.

The forensic accountant or certified fraud examiner will want to agree the desired outcome of the matter with management and develop an investigation strategy based upon the organisation’s own fraud response plan. It may be possible to interview the whistleblower early on to get a quick “heads up” into what was going wrong before beginning a detailed analysis of the accounting records, interviewing staff and making other enquiries often outside the organisation.

For the actual mechanics of the investigation the forensic accountant will most likely want to follow the trail of the stolen money. “Follow the money” will be the primary goal in such a forensic audit as this will provide not only a chance of getting the money back, but also evidence of why and how the fraud took place.