A brief glance at the financial pages of any newspaper will point to the rise of corporate fraud, malfeasance, poor corporate governance and simple, but all too often, outright theft. Increased globalisation and the outsourcing of manufacturing processes in particular, means that it is impossible to expect Asian countries and in particular the PRC, not to be afflicted by this malaise.
As it is often told, the role of an auditor is not to uncover fraud. We agree. This is the role of the forensic accountant with his specialised training, his techniques for uncovering fraud and his ability to explain his findings to a court. Uncovering bribes and kickbacks, embezzlement, fraud and misfeasance therefore require a highly specialised skill set.
Forensic accounting covers a wide range of assignments and inevitably every case is different. However, in essence it is the application of investigation techniques to interviews with employees and witnesses for facts and statements, financial statements and accounting records and transactions to ascertain the correctness of the statements and the true effect of the transactions entered into.
Forensic Accounting can take place in a wide variety of situations. Shareholders may believe that management is defrauding the company; senior management may have concerns that one or more employees are not acting in the best interests of the company; a joint venture partner may believe that the other shareholder is diverting business away from the company to another entity controlled by them; companies registered in the U.S.A. may require a review of a subsidiary or associated company for the purpose of establishing compliance with Sarbanes Oxley and / or the Foreign Corrupt Practices Act.
Given the development of the information technology and the popularity with convenient electronic devices, and globalisation of the economy, daily correspondence through the internet forms an integral part of our business and personal world.
In order to keep up the pace and competition, most of the communications and instructions of all levels of the companies are being communicated through the cyber world.
Messages and instructions relating to fraud conducted via such electronic means will leave an “electronic” trail for investigators to go after.
With the proper forensic software and tools, we are able to clone, retrieve, index and screen these electronic data in a logical and systematic approach.
We have dealt with investigations and frauds in the following areas:
Financial Statement Frauds, including:
- Inaccurate, Incomplete and even Misleading Capital Verification Reports
- Improper Asset Valuation
- Over / Understatement of Assets / Receivables
- Concealment of Liabilities/Expenses
- Fictitious Revenues
- Improper Disclosures
Non-Financial Statement Frauds including:
- Falsification of Internal / External Documents
- Letters of Credit
Misappropriation of Cash and Other Liquid Assets including:
- Fund Flow Circulations and Fund Tracing
- Misappropriation of Sales Proceeds from Scrap Materials
- Unauthorised Write-offs of Receivables
- Understated / Unrecorded Sales
- Fraudulent Disbursement Claims
- Intellectual Property Theft and Royalty Fraud
- Purchase Orders and Delivery Notes
- Sales and Shipping Documents
- Asset Registers
- Falsification of Shipping Documents
Bribery and corruption, including:
- Conflict of Interest
- Purchases / Sales Schemes
- Invoice Kickbacks
- Anti-Money Laundering
Commercial and Practical Approach
Our experience shows that out-of-court settlements are often a better option than full-blown litigation or arbitration when one takes into account the intangible damage to reputation and the associated time and costs involved. During the course of our forensic investigation and analysis, we will collect information which will facilitate our client’s commercial negotiations at a later stage, should they wish to follow that course.
Supporting Legal Proceedings
Frequently, our investigations form part of court proceedings, often aimed at verifying certain facts and figures of transactions, accounting entries and commercial arrangements, securing reimbursement of losses arising from the fraud which we have uncovered. We have experience in giving evidence in court to present and justify our findings in support of such proceedings.
Our team has been actively involved in Forensic Accounting and Litigation Support assignments in Hong Kong and other jurisdictions and are well respected by other professionals.