Originally published in Finance Monthly.
WHAT ARE THE MOST COMMON CASES THE FORENSICS TEAM AT GHJ WORKS ON?
We can divide our practice into two broad areas: Forensic investigations and litigation support.
Forensic investigations involve assisting companies to analyze allegations of wrongdoing. This could involve fraud, theft of cash or other assets and other misconduct, but can also include financial mismanagement, financial misreporting, as well as a review of the company’s internal control procedures. In these matters, we are generally engaged by the board of directors or senior management to provide clarity and solutions to the issues on hand. For example, if we are asked to investigate an allegation that someone has “cooked the books”, the question we would investigate may be:
- Who cooked the books?
- When were the books cooked?
- How much were the books cooked?
- How do we un-cook the books?
Procedures for resolving these matters may involve but are not limited to performing analytical procedures, interviewing key individuals, reviewing complex accounting data, and reviewing specific transaction details. For instance, various analytical procedures allow forensic accountants to identify unusual or unexpected trends that would otherwise be obscured in thousands or more complex transactions.
Common types of analytical procedures are analyzing transactions made on weekends or holidays, large round numbers, common duplicate amounts, and unusual keywords. We also analyze large data sets by cross-referencing employee details against vendor details for concealed theft of assets between related parties. In the same data set, vendors with P.O. boxes are closely inspected, which is a popular method for concealing the perpetrator’s real location. In addition, we can verify employee details to identify “ghost employees.” In this procedure, we look for fictitious employees or other individuals receiving paychecks who are not actual employees.
Interviewing key individuals is also a critical component of a forensic investigation. Key individuals generally include the suspected perpetrator, the suspected perpetrator’s supervisor, peers, and any other employees with whom the suspected perpetrator had a close working and/or personal relationship. They also include other employees with the authority to sign checks, approve invoices, transfer funds, hire employees, approve pay increases, etc.
Interviewing can reveal a wide range of facts about the suspected fraud and provide insight into a larger scheme that was not questioned before. Additionally, interviews provide us with crucial qualitative information, such as the suspected perpetrator’s expensive hobbies or other red flags in committing fraud, including financial trouble or other personal pressure such as family issues or substance abuse.
Overall, a forensic investigation is a dynamic and iterative process. We employ a wide array of tools to provide answers for our clients; however, it is always crucial to adapt and pivot as necessary with the discovery of new information and data.
For engagements involving litigation support, we assist attorneys and clients in evaluating and untangling complex matters with our expertise. Our services may include analyzing and calculating economic damages, assisting with discovery review, reviewing documents and financial data, determining appropriate damages methodologies, quantifying damages, preparing expert reports, providing expert witness testimony, and reviewing opposing experts’ opinions.
In these engagements, we may assist in producing an expert report for a trial or arbitration. An expert report generally includes our expert interpretation of the matter and a dollar amount of economic damages that our client may be owed. Calculating economic damages may involve analytical procedures, interviews, document reviews, and accounting data reviews similar to forensic investigations. Additionally, litigation support engagements may involve a significant portion of research and input on specific industry trends and projections. Once we have concluded our opinion for the court, we also assist attorneys and clients by attending depositions and providing expert witness testimony. We also assist by reviewing the opposing expert’s reports and attending their depositions. Overall, we work closely with attorneys and clients throughout all stages of the dispute.
WHAT ARE THE KEY TRAITS A GREAT FORENSIC ACCOUNTANT AND AN ADVISER NEED TO POSSESS?
There are many key traits to be a great forensic accountant and an adviser, but it really comes down to two key traits: a drive to solve problems and clear communication with the attorneys and clients.
As forensic accountants, we are engaged to solve problems and provide clarity on issues that may be overwhelming for the client’s scope. In contrast to other areas of accounting, such as audit services, disputes we are engaged to resolve are often unique. For this reason, having a great drive to solve problems is one of the essential traits in this field.
Furthermore, we must be able to clearly and effectively communicate to those that we serve. Our investigation and litigation support become meaningful only when our work can be properly articulated to those who may not be experts in the field. This includes verbal communication throughout the process, writing skills to compose expert reports, and experience to navigate the challenges of one of the loneliest places on earth, the witness stand.
WHAT IS YOUR FAVOURITE PART ABOUT YOUR JOB?
My favourite part about my job is that our work is rarely dull. We get to analyse and gain insights into all types of industries and diverse companies and individuals and we get to solve real problems. Whether it is a forensic investigation or expert witness assignment, our work provides tangible value by providing our clients with the bottom line. We bring real solutions to complex business problems.
For more information on this topic, contact GHJ’s Forensic Services Team.