In the liquidation of the failed Bank of Credit and Commerce International (BCCI), forensic accountants were called in to locate and verify the existence of assets as well as trace the movement of money all over the world. Forensic accountants were also employed in the investigation of the finances of Robert Maxwell's publishing empire to trace assets and identify movements of money. In the now famous Barings saga, the forensic accounting team was asked to reconstruct the facts and investigate the causes of the collapse. The case resulted in the jailing of Nick Leeson in Singapore.

Leading accounting firms are increasingly offering specialist services in what is often termed "litigation support" or "forensic accounting". These services call for, inter alia, a combination of audit, accounting, taxation, investigation and consulting skills. Forensic accounting is a separate discipline from that of auditors, tax accountants and liquidators. A forensic accountant typically combines a professional accounting background with an appreciation and understanding of the practicalities and intricacies involved in litigation.

In times of economic growth, business transactions become more complex and intricate. In times of an economic slowdown or crisis, the incidence of financial irregularities, fraud, disputes and loss of profits increases. In both cases, an environment is created where commercial crime or misappropriation increases in scope and complexity and the incidence of litigation increases as a result. With this comes the need for forensic accountants to unravel the complexities and present the cases in a manner that is understood by the courts and relevant parties.

Forensic accounting services can be broadly divided into the following areas:

The Provision Of Expert Opinions
A forensic accountant typically provides expert opinions on the quantification, evaluation and assessment of the loss of profits or earnings or damages arising from breach of contracts or matrimonial disputes. He may also be called upon to provide an independent and impartial opinion in disputes involving the interpretation of technical or commercial issues.

In litigation or arbitration where both sides often engage their own expert accountants to assist in their cases, the forensic accountant is often involved in forming strategies for the cases and suggesting lines of investigation for lawyers. He may also be called upon to critically analyse other expert reports and provide his opinion thereon.

Fraud Investigations And Prevention
Most fraud investigations are never the same, requiring the forensic accountant to have an investigative mentality, to be imaginative and to think laterally. In effect, he has to put himself in the mind of the person who has perpetrated the fraud. Besides, a significant amount of planning has to be done in order to identify important and significant areas for investigation. The discovery and analysis of financial and other information has to be systematic and properly managed as often, this involves a large volume of documents. Conclusions have to be based on sound reasoning derived from the evidence uncovered.

A forensic accountant sifts through, discovers, dissects and analyses financial and other information in order to uncover accounting tricks or financial irregularities to inflate or deflate results. He may also reconstruct financial statements and information where business records have been lost or destroyed either intentionally or accidentally.

As in the provision of expert opinions, the forensic accountant is often involved in formulating the strategies for such fraud investigations.

Forensic accountants may also be called upon to identify areas of risks in a business including an assessment of the existing controls and providing recommendations as to how improvements can be made. Such reviews are like health checks. Frauds are more likely to be committed where controls are weak rather than when absent.

Acting As Independent Valuers, Mediators Or Arbitrators
When there is a dispute in valuations, the area of dispute normally can be narrowed down to one or a few technical points. The expertise of a forensic accountant is often invaluable in the resolution of differences or in mediating between the disputing parties.

Some specific examples
Listed below are more examples of the kind of work undertaken by forensic accountants. These cases are culled from the files handled by Chio Lim & Associates.

Year published : 2003