Mark Jenner & Co – Forensic Accounting Services

How do you choose a forensic accountant? Many people think that one forensic accountant is the same as any other - some think that the more you pay the better service you will get. As with all other professional services this is of course very far from the truth, as there are many different forensic accountants on the market, all with vastly different experience and expertise. It does pay dividends to find one that has the particular skills that your case needs.

You might require an expert accountant to understand and present a particularly complex piece of business or accounting activity. You might want a financial investigator to delve into complex and interlinked potentially fraudulent transactions. You might want a minority shareholding in your family company valued or you might want an independent critique of a financial statement prepared for a white collar criminal case.

Choosing the wrong forensic accountant would be like asking a plumber to carry out an electrical installation. Just because they are both tradesmen does not mean they carry out similar jobs. This obvious point can be carried further – a plumber will re-plaster an area of wall where he has been carrying out some pipework. He will carry out a neat job undertaking this other “trade” in order to finish off his own speciality work. However, you would not ask him to re-plaster your whole house – he could not do it as well or as efficiently as a full time plasterer!

Many forensic accountants are appointed by lawyers. Here the accountant may be chosen for the larger firm that he represents. However, even here care must be taken – all practitioners within an accounting firm or specialist forensic accounting practice do not possess the same skills. When choosing a forensic accountant, the individual expert must be considered apart from the overall expertise of his firm because, if it comes down to a court appearance, it is the expert that will appear in the witness box.

So what should you be looking out for when choosing your forensic accountant?

Experience

As discussed above, the particular experience and skills must match the needs of your case. The areas where you might need forensic assistance are numerous, and you should check that your chosen expert regularly undertakes similar cases successfully. These might include business valuation, estimating loss of profits, checking tax assessments, investigating fraud, considering professional accountant’s negligence, defending white collar crime cases and confiscations. In addition there are many, very specialised circumstances where you might want particular industry experience, such as experience valuing a construction business. Another example would be determining negligence of a lawyer’s practice in terms of fulfilling its accounting responsibilities for the Law Society.

Credibility

A forensic accountant’s work will often result in giving evidence as an expert witness at a trial. An expert accounting witness must be credible – so that weight can be given to his opinion in court. He will be asked questions by opposing counsel that are designed to reveal any flaws in his abilities that would give rise to doubt over the credibility of his expert evidence. Of course relevant experience in the particular subject area is important, but also being a practitioner in a certain area of accountancy and not just a full time expert witness is also important. Giving evidence in white collar crime cases on behalf of the defence is much more credible to the court if the expert witness is also a fraud investigator as well.

As well as relevant experience, training and qualifications provide substantial force to an expert’s credibility. The expert accountant will be a Fellow of his relevant accounting institute, likely educated to post graduate levels at university and be a member of relevant professional bodies and forums. Examples of his writing skills and expertise in the subject areas he specialises in will be evidenced in articles in the press and journals, and even in books published on the subject area.

Court Appearance

An important aspect of suitability, if a forensic accountant is to effectively give evidence in the witness box, is whether or not he has been in this position before. Experience in this area is important. But this is an area where caution is needed. Some forensic accountants are seldom called to give evidence – for example if they work on very large criminal frauds where the findings of the prosecution and defence are often argued out of court until some level of agreement is reached. However, most good forensic accountants will be able to demonstrate some competence giving oral evidence in court.

Cost

Not all forensic accountants cost the same! If you choose a forensic accountant from one of the larger accountancy practices you will be employing somebody that might cost you in the region of £500 or more per hour. A lot of the work will be delegated to more junior staff and so this rate might fall quite considerably overall. It is still expensive, but your work will be backed by the brand and quality assurances that large firms can give.

If you choose a forensic accountant from a small firm of accountants you might obtain services at £100 per hour or even less. Contained within these two price ranges are hundreds of different forensic accountants, some good ones charging very little and some very poor ones charging a lot. You may have a budget that will constrain your choice, but as far as possible the costs should be the last consideration. It is most important that you choose an expert accountant to carry out your forensic accounting work that is suitable for your case. He or she must:

1. Be experienced and comfortable dealing with the various aspects of your case – this means that they will not take on your case until they have thoroughly familiarised themselves with all aspects of it, and have ascertained that they are acting well within their expertise.

2. Have a curriculum vitae that will impress the reader – this means that work experience, qualifications and professional interest all indicate a high level of competence in the relevant areas.

3. Whether from a large or a small firm, or a specialised niche practitioner – the forensic accountant should appear highly professional in their approach. Costs will reflect the business infrastructure they utilise but in all cases will be higher than the general costs of accountants – owing to the very specialised nature of the work.

4. Finally – and for some most importantly – is the expert someone you can work closely with? If you are employing the forensic accountant for your own dispute or problem you will be working closely and airing your personal issues. It helps if your chosen forensic accountant is approachable and tactful. Even if you are employing an expert on behalf of your client or your company – you must still work closely with them and it helps if you can get on well - working as a team.

A newsletter for fraud practitioners

The New Year has got off to a flying start with a number of new cases waiting for me on my return from what must have been the coldest holiday on record – I spent the first few days of 2010 in New York!  Suffice to say it was not much warmer on my return and unfortunately my current work load does not include the prospect of a visit to Dubai or the Cayman Islands.

However things are warming up in the expert witness side of my work with a number of trial dates in the diary between now and Easter.  It does seem that contrary to recent thought that experts are seldom called to give evidence in fraud trials the reverse now seems normal.  The reason always given for steering the expert away from the witness box was because of the complex nature of the crime and therefore perhaps the potential for tying the judge, jury and even the expert himself, in knots!

Accountants in the firing line – who said we were boring?

Lawyers, police and even teachers get their own TV soap dramas but accountants never seem to feature – that is other than the occasional cameo appearance and the subject of yet another boring accountant joke!  However, we number crunchers can get into some scrapes, as recent news headlines will confirm.  There is the case of the ex-KPMG trainee who made £25,000 false expense claims from his employers to fund an online gambling habit.  His punishment was a severe reprimand from the ICAEW and a 12 month exclusion from this professional body.  Seems fairly mild when compared to another accountant who is currently facing charges of money laundering and conspiracy to defraud £millions via a Ponzi scheme. He was the crooks accountant and apparently failed to spot the suspicious activity of his clients.  He could face four years or more in jail for making a few pounds in what he thought were legitimate professional fees.

Vantis, the UK listed national accountancy firm are in serious cash flow difficulties (according to their auditors Ernst & Young) which appears to be as a result of involvement with the liquidation of assets relating to the multibillion dollar fraud masterminded by the American financier Allen Stanford. The US authorities have frozen the assets which means that Vantis is unable to be paid for its services.

I can’t believe that a capable scriptwriter could not come up with something to rival “The Bill” with all these frauds going on!

The Government is as much use as a chocolate fireguard…

When it comes to scaling up the fight on fraud the response by the Government is unlikely to make much impact. £29 million was earmarked as a budget in 2008 for developing a cohesive UK approach to the problem of fraud.  So far we see the advent of the National Fraud Strategic Authority (NFSA) which, true to form for a publicly funded organisation, has already its first name change to the National Fraud Authority (NFA).  But more to the point, what is it doing to bring together the police fraud squads, private sector fraud resources and other fraud regulators to become an effective front against the perceived easy pickings that fraud seems to be? At least the Attorney General’s office has updated its links from “NFSA” (which had stopped working) to “NFA” on its web site now and we can all see the program of work they are embarking upon. Or can we?

The stated purpose is to “…draw together the counter-fraud community…” This implies public sector fraud prevention bodies and does not mean more trained police fraud squad operatives with access to investigation resources.  Reading further the NFA website suddenly admits that “…we are not solely responsible for putting the NFS (National Fraud Strategy) into practice…” I worry that we have another government quango spending our money and very little will get done.  I suppose time will tell.

All fraud news is bad news?

It seems that we always complain about the fraud framework, whether it be fraud prevention by the authorities, prosecution, or defending white collar business crime. It is the nature of the business…it is a big problem.

Fraud causes so much trouble and strife for millions of people that it is no wonder that the few real anti-fraud regulatory forces we do have guarding us become a little over-zealous in trying to put the culprits behind bars.  This in itself creates a real need for a robust criminal defence industry in order to balance the adversarial system that results.  If the police generally do not use forensic accountants to present their frauds, the defence certainly needs them to temper the allegations in many cases.  The general consensus is that the Legal Services Commission’s proposals to shave 20% from the expert witness budget available to the defence teams is going to result in fewer capable experts being available in the future.  Access to justice may well be denied for some – one thing is for sure, LSC will no longer be funding expensive city centre offices – which may not be a bad thing?

Balancing quality with profits has always been difficult for us professionals, who have relied upon a wave of business expansion to be able to carve an acceptable slice of remuneration for themselves.  Now that we are trundling along the bottom of a downturn, regardless of the miniscule percent of recovery alleged for the recent quarter – there is even more need for investment in the fraud sector.  Then we might see a little less talk of co-ordination of fraud resources and a lot more actual investigation, prosecution and prevention of fraud.

By Mark Jenner – Mark has been a forensic accountant for over 15 years specialising in fraud for most of that time. He heads up a dedicated fraud advisory service line focusing on expert witness assignments and fraud investigation. Regularly attending court to give oral evidence, his portfolio includes criminal fraud prosecutions, proceeds of crime and money laundering offences, corporate enquiries (including insolvency investigations) and asset tracing assignments.