The Role of the Forensic Accountant
Forensic accountants use their expertise in finance to investigate fraud and other financial misrepresentation.
Our Forensic Accountants will analyse all types of financial information and this will then enable lawyers to actively prosecute criminals. Typically these are for things such as funding illegal activities.
A forensic accountant will also work with insurance companies and other clients to resolve disputes.
Many commercial disputes are the subject of complex litigation; however, a number of these disputes are being resolved through mediation and other forms of Alternative Dispute Resolution (ADR). In recent years Courts in the UK have increasingly invited parties to use mediation to resolve commercial disputes.
Forensic Accountants and Mediation
Mediation is the use of an independent third party who facilitates the parties to reach a mutually beneficial settlement of the issues in dispute. The mediator has no role in deciding the outcome of the issues in dispute, however a skilled and experienced mediator will facilitate a process where the parties in dispute are able to arrive at an agreed settlement.
Calculation of the cost of goods sold
Identification and classification of fixed and variable costs
Allocation of overheads e.g. to a manufacturing process
Foreign currency and interest rate swap calculations
Discounting future losses (e.g. by applying a weighted average cost of capital)
Calculation of Wasted Management time and Taxation.
A forensic accountant’s role in mediation would include the identification of all of the different heads of loss, and calculation of same. In acting as a data provider or data arbiter in Mediation the forensic accountant is able to reduce the data conflicts which often prevent the parties from arriving at an agreed position.
In mediation, both the parties and the mediator may benefit from the forensic accountant attending the mediation to present their findings to the mediator in the presence of the parties, or independently of the parties who are involved in the dispute.
Often in mediation, the period of loss, i.e. the period in which losses will continue to be suffered by one party arising from the alleged actions of another party is an area of dispute. A forensic accountant must be able, during the course of a mediation, to adjust their calculation of losses arising for different scenarios that may emerge and that may not have been considered by either party prior to the mediation.
Being able to provide information to the mediator or the parties as to the effect of resolving differences in areas such as the loss period, or volume of lost sales, and the knock on effect of doing so on the overall quantum of loss, is often invaluable to the mediator and to the parties as a successful mediation progresses towards a resolution.
Having access to an independent forensic accountant during the mediation process means that the mediator and the parties involved have access to an individual with:
- Specialist industry expertise (if needed)
- The ability to bring and maintain an impartial view of the matters in dispute prior to and during the course of the mediation
- In-depth investigative and analytical skills
- The ability to quickly perform complex calculations under a number of different scenarios
- The ability to present their findings in a succinct manner
- The ability to adapt during the course of mediation to new evidence or new arguments presented during the mediation by either party, and to quickly adjust any calculations to take account of new information or scenarios that may emerge and which could lead to a successful resolution,