FAQ – Forensic Accounting


The SV Partners Forensic team offer an array of services in forensic disputes, economic loss analysis, dispute and forensic advisory services and company and business valuations to the legal profession, government, and corporations.

Forensic Accounting


What is Forensic Accounting?

Forensic accounting is accounting work that relates to matters that are, or are likely to come before a Court. A forensic accountant is an independent expert witness providing expert evidence to assist the Court deciding the matter before it.

Why would I need a Forensic Accountant?

You would need a forensic accountant in the following types of situations:

  • You are going through a divorce and your previous spouse disagrees with you in respect to the value of your business assets
  • You have been injured in a workplace or motor vehicle accident and are seeking damages for your loss of past and future income
  • You are the victim of  fraud and are attempting to recover your losses through legal proceedings
  • You are accused of committing fraud and are claiming you are innocent
  • You are defending an action against you brought under the proceeds of crime act

Who do Forensic Accountants work with?

  • Couples who have separated and own businesses
  • Entities who have had land resumed by a constructing authority such as a City Council
  • Constructing authorities such as a City Councils who have resumed land
  • People and entities who are in a shareholder dispute
  • People and entities who are suing another party for damages resulting from a breach of contract, or who have been provided with false and misleading information, leading to a course of action which has caused a financial loss
  • The victims of, and those accused of  fraudulent activity
  • How can I detect fraudulent activity?

    There are a number of tools a forensic accountant can use to help detect fraudulent activity within a business. One of the most helpful class of tools are referred to as data analytics.

    Data Analytics

    Data analytics consists of running certain tests over a database of information within the business to test for irregularities. While the exceptions that are identified as a result of these tests may not all represent fraudulent activity, they narrow the field in which to look. For example, a data file for a company’s creditors might be examined for matching bank account numbers found in the company’s payroll data. This could indicate an employee arranging for a fraudulent payment allegedly to a genuine creditor being paid into his or her own bank account.

    What is a Fraud Risk Assessment?

    A fraud risk assessment is a review undertaken by a forensic accountant that rates the businesses policies and procedures against a best practice standard, such as AS8001-2008.

    The fraud risk assessment identifies areas where the business needs to improve its policies and procedures, and will offer assistance to achieve these improvements, as well as prioritising these improvements.

    How can a Forensic Accountant assist with my court proceedings?

    In terms of court proceedings, a forensic accountant is considered to be an expert witness and as such, can provide opinion evidence that can’t be provided by a normal witness. As an expert witness, the forensic accountant has an obligation to assist the Court in relation to the matters it must decide, and is not an advocate for the party who pays his or her fees. The benefit of this is the court will give more weight to the evidence given by a forensic accountant than it would if that same evidence was led by a party to the proceedings.

    Valuations


    SV Partners can provide our clients with an objective and defensible opinion of the value of their business/organisation.

    What is a Business Valuation?

    business valuation is a procedure undertaken by a forensic accountant to determine what a business is worth. In essence, the forensic accountant is attempting to determine the present value of the future net cash flows a business will earn into the future. There are a number of methodologies used to value a business which include:

    • Discounting future cash flows
    • Capitalisation of maintainable earnings
    • Net asset backing

    Why would my business need a Valuation?

    There are a number of reasons why a business would need to be valued, including:

    • Dispute resolution between partners and shareholders
    • Sale of the business or part thereof
    • The acquisition of a business,
    • Management buyouts
    • Retirement and/or admission of partners
    • Resumptions and compulsory acquisitions
    • To determine the value of goodwill
    • To determine the value of intellectual property
    • Determine the value of a minority shareholding

    Family Law


    Our team has extensive experience in being appointed an expert by either one or the parties, or as a single expert. We can provide you with properly considered opinions on all financial aspects of the case.

    What type of investigations does a Forensic Accountant provide in Family Law matters?

    The most common types of work a forensic accountant does in relation to family law matters is to:

    • Value the parties business interests
    • Trace missing assets and income
    • Reconstruct accounts
    • Unravel complex business structures and transactions
    • Provide advice on capital gains tax and other tax implications of property settlements
    • Assessing earnings of the parties involved for the purposes of child support and spousal maintenance applications.

    What does a Voluntary Administration do?

    voluntary administration provides a flexible procedure, enabling a company time to compromise an arrangement with its creditors, which may save the company, the business and jobs while maximising the return to creditors.

    It can:

    • Provide a company with breathing space to deal with creditors in an orderly manner and prepare proposal to give the best return to stakeholders
    • Allows an independent party to review the company’s affairs and deal with the pressures of creditors
    • Reduce the possibility of secured creditor proceedings against the assets of the company
    • It may allow the company to stay out of liquidation

    If the voluntary administration attempt fails, the legislation facilitates the winding-up of the company.

    How can I protect my assets during a marital dispute?

    The only way to protect your assets from your spouse is to enter into a Binding Financial Agreement (‘BFA’). If a BFA is entered into before a marriage it is generally referred to as Prenuptial Agreement. BFA’s can also be entered into during the marriage or after its dissolution.

    A BFA is a certain type of agreement in which the parties agree, upon breakdown of their marriage on:

    • The division of their property including superannuation
    • Spousal maintenance
    • Other incidental issues

    How can I trace my partner’s assets during a marital dispute?

    Prior to a family law property settlement it is not uncommon for one spouse to attempt to hide matrimonial assets to maximise their slice of the cake. A forensic accountant will often be engaged to trace hidden assets and or unrecorded income. In searching for hidden assets a forensic accountant would perform some or all of the following:

    • Search ASIC records for undisclosed entities in which a spouse held an interest or a directorship
    • Review financial statements for transfers of cash or other significant assets out of the business into related but non-disclosed entities or locations
    • Review tax returns and supporting documentation to ensure tax had not been deliberately overpaid with a view to reclaiming it in subsequent periods
    • Review business expenditure for excessive personal expenditure
    • Review dividend and interest income to identify undisclosed investments
    • Search for payments to fictitious employees and/or creditors
    • Search for major new contracts that have been deferred until after a business has been valued  to reduce its profitability and therefor its goodwill
    • Look for a divergence between the spouse’s lifestyle and their disclosed income

    What type of Valuation’s are required in a family dispute?

    In order to effect a family law property settlement, the net asset position of the parties must first be determined. This will entail either agreeing on a value for all of the assets and liabilities or having them professionally valued. While a real estate agent can value real property including the family home and business premises, a forensic accountant will be required to value the business interests and any superannuation interest that the parties might have.

    Forensic accounts are often also asked to value or assess the earnings potential of the parties for the purposes of child support and/or spousal maintenance applications.

    Insurance


    Our forensic accounting experts have extensive experience in quantifying business or personal losses as a result of insurable events.

    What type of investigations does a Forensic Accountant provide in Insurance matters?

    forensic accountant can be engaged by either side in an insurance matter to quantify the extent that the insured has suffered a loss. For example, a forensic accountant may assess the net present value of the past and future economic loss suffered by a victim of a motor vehicle or workplace accident.

    If my business suffers from a financial loss, can you assess the damages and loss of profits?

    forensic accountant can assess the financial loss suffered as a result of actions by another party. The financial loss will be equal to the net present value of the difference between the notional past and future profit that could have been earned had it not been for the actions of the other party and the actual past and future profit earned by the business as a result of the actions of the other party.

    Commercial


    Our expert services include documentation reviews, preliminary assessments of loss, financial analysis and research, culminating in formal written reports and the giving of expert testimony.

    What type of investigations does a forensic accountant provide in Commercial matters?

    Forensic accountants are often asked to assist in assessing the losses allegedly suffered by one party as result of the actions of another. Examples of situations where there is a need to assess the alleged losses suffered include the following:

    • A farmer alleges that the pesticide supplied by a company has killed or seriously damaged his orchard
    • Malicious advertising by a competitor about another company’s product has caused greatly reduced sales and therefore weaker profits
    • Where a company is forced to recall its product as a result of purchasing a faulty component from another company
    • Where a registered tax agent has provided incorrect tax advice to a client, who as a result has lodged incorrect income tax returns, which have led to additional tax being incurred, as well as penalties and interest costs

    How can we assist in investigating a breach of contract?ation do?

    A breach of contract occurs when one party either knowingly or unwittingly fails to deliver on what it has agreed to provide under contract to another party.

    forensic accountant will be able to assess the loss actually suffered as a result of the breach of contract. This assessment can then be used as a basis of obtaining compensation from the party that breached the contract, either by way of direct negotiations or by applying to a court for an award of damages. The assessment of the losses would take account of both the risks involved in whether or not the losses would have actually occurred and the time value of money.

    Property


    Claims for compensation are becoming more complex and increasingly more difficult to navigate. In such an environment, expert financial advice is often required to effectively analyse the financial information to assess the extent of any losses that may have been suffered.

    What type of investigations does a Forensic Accountant provide in Property matters?

    The most common type of work a forensic accountant performs in relation to property matters is the valuation of a business for the purpose of a family law property settlement. However, there are numerous other areas where forensic accountant can be of assistance, such as a dispute between a property developer and the builder. In this case, a forensic accountant may be asked to investigate the costs claimed by builder under a cost plus contract to identify costs that should have been allocated to an unrelated development. Forensic accountants will also often be asked to value the loss suffered by business as result of the resumption of land by a constructing authority, such as a local council or a government department.

    Are you concerned about your financial position? Contact us now for an obligation free consultation.