Mark Jenner & Co Limited – Forensic Accounting Services

If you are the victim of a fraud within your business you will likely be very angry. The immediate reaction is…. to react! This can sometimes make the problem worse. You can’t simply sack a suspect employee, march round to their house and search through the contents of their home study in the hope of finding where the stolen money has gone! If you did this you might easily find yourself on the wrong end of a suit for trespass or constructive dismissal (likely both).

If you have lost money invested in what turns out to be a fraud, or in a company that has entered insolvency under suspicious circumstances, you may find yourself disadvantaged while others appear to prosper. It is important that you pursue asset recovery procedures appropriate for the situation in a robust and measured fashion – to enhance your chance of success and prevent wasteful costs being incurred.

It is important to decide your priorities in any fraud investigation. These may include securing a criminal prosecution of the culprit as an example to others, protecting your reputation in the market place or allowing the fraudster to be safely dismissed. Recovering lost assets is likely to be high on, if not top of, your list. Asset tracing and recovery is one outcome that benefits from an organised approach right from the start. Any heavy handed or inappropriate action may cause the trail to the fraud losses to dissappear – evidence is destroyed and the stolen money can be transferred beyond easy reach.

Every case is different and it is important from the outset to understand the risks and rewards of each different course of action that might be available:

• Is an initial fraud investigation required before or after a suspect is confronted?
• Should initial fraud investigation work be carried out covertly?
• Should the police be informed of the fraud at the outset – can you be sure they will not decide to investigate themselves potentially compromising your business?
• What specialist legal fraud advice do you need?
• How can you best utilise your own resources to obtain the most cost effective outcome?

Here are a few examples where Mark Jenner has successfully assisted with recovering misappropriated assets.

Insurance investigation

A ‘whistle blower’ in a large motor services company revealed a widespread practice of submitting forged claims. The work included comparing customers’ signatures on thousands of claims documents to identify forgeries. As a result it was possible to quantify the level of false claims made over a period of five years and recover a substantial seven figure sum on behalf of a number of insurance companies.

Acquisition of subsidiary

A mortgage and insurance broker company traded with another financial services company on a  regular basis. Over a period of time it lent money to this company on an informal basis and also allowed its debtor balance to increase substantially. As a result it commenced negotiations to acquire ownership of the other as a means of repayment of money owed. It was possible to trace the monies originally provided and identify reasons for the debtor company’s poor performance. The work showed financial irregularities perpetrated by the subsidiary’s director and quantified significant levels of personal spending – thus assisting with negotiations and recovery of value for the parent company client.

Multiple invoicing by motor trader

A number of credit finance companies required the activities of a motor retailer to be investigated over a ten year trading period. The work showed that the business owners had been regularly executing multiple finance agreements on the same vehicle. The reason that the fraud had not been discovered for so many years was the teaming and lading of funding for one vehicle being used to discharge outstanding amounts on another. Although some £100 million of fraudulent transactions had taken place, which was of interest to the police, the amounts owing to the credit companies had only accumulated to about £2 million by the time of the investigation. The work involved working alongside the police quantifying losses and identifying the assets acquired by the motor trader thus allowing recovery of value for the creditors.

Tax evasion by caravan company owner

A caravan company collapsed in a competitive market place and entered insolvency proceedings. Investigations on behalf of the liquidator revealed that the owner and director of the company had been living a hedonistic lifestyle at the expense of the company. Much expenditure on various girlfriends and high living had been put through the books as caravan manufacturing costs. By a series of interviews with former employees, it was possible to build a picture of activity that allowed a meaningful examination of the books and records. Evidence of around £500,000 false invoices was found and the director agreed to repay this money for the benefit of the disadvantaged creditors when presented with the facts.

Mark Jenner & Co is a firm of Chartered Accountants that specialises solely in forensic accountancy. Although services do not include normal accounting lines such as auditing, preparation of year end accounts and the provision of tax advice, a forensic accountant must be competent in all these areas in order to be able to examine financial records, often produced by accountants, and provide an unbiased and “expert” viewpoint on their content.

Forensic accounting techniques are used by investigative accountants to look at financial records, dig into their background and present a clear and concise account of what they mean and how they impact a particular matter that they have been asked to consider. Forensic accounting techniques are not the same as normal accounting methods, such as auditing techniques or methods for considering tax issues – but they may include the use of these skills along with investigation techniques, legal understanding and a natural tenacious desire to uncover a hidden issue.

A forensic accountant is an expert accountant and experienced business advisor that is asked by one party in a dispute to provide clarification and opinion concerning the issues being debated. There are a wide range of circumstances that can involve the need for forensic accountants. These can range from valuing assets for one or both parties in a matrimonial dispute in order that a division of wealth can be made, to establishing how much profit has been lost as a result of a factory stoppage that is being blamed on another party. Quantification of the value of damages or losses in order to assist with a claim is a big part of a forensic accountant’s work.

However, one of the biggest branches of forensic accounting is focused on crime. In particular financial crime or, in other words – fraud. This is the area of work that Mark Jenner & Co focuses on. Indeed the general public often associate fraud with forensic accounting. Fraud by its very nature involves some form of accounting anomaly or financial deceit. It is the manipulation of accounting records by business criminals (white collar criminals) to hide the theft. As such, one of the most important persons needed to investigate and deal with fraud is the expert accountant.

It is the financial and business expert that is able to understand the accounting evidence in order to recognise, or unravel, the fraud. He or she will look for the reasons it was possible for the fraudster to commit the crime and try to discover the route the losses have taken leaving the victim company. It is this forensic accountant who traces these losses and demonstrates the ultimate destination of the money by analysing bank statements and other financial records when “following the money”. It is arguably the most important part of the fraud investigation because without it, interviewing suspects or gathering evidence does not have a focus.

When confronted with a new case, the forensic accountant does not have a specific set procedure. Every fraud is different, it is the unusual and new loophole that every fraudster is seeking in order to surprise an organisation that thought it had covered all the bases. The money trail is the starting point and establishing how the losses occurred and how much has been stolen is the first task. The forensic accountant must try to place himself in the fraudster’s mind and attempt to answer the question “how would I steal the money?”

The forensic accountant may enlist the help of other competent accountants to analyse bank statements and collate data. He or she may often use a victim organisation’s own resources. Sometimes accounting software is utilised to make the repetitive tasks easier, such as IDEA for Windows or Altia statement analysis software. Spreadsheets are by far the most common tool for collating vast quantities of records and analysing unusual events within normally repetitive data.

It is the interpretation of results and provision of opinion where the forensic accounting skills are most valuable in any fraud. An opinion may have to be supported when under cross examination and the other party is not going to simply accept one persons say so. It can be very lonely in the witness box for a forensic accountant! However, a good forensic investigator will only present balanced and independent opinions that are based on a thorough understanding of all the facts.