Accounting professionals have been providing these "specialized services" for many years, however with the growing complexity of the business environment and the increased number of "Corporate Fraud Investigations", these professional skills are "in high demand".
Forensic Accountants Vs. Corporate Auditors When Investigating Financial Irregularities:
Expertise and disclosure requirements are quite different for Forensic Accountants, as apposed to the Corporate Auditors. Forensic accountants prepare their work for court purposes while Auditors generally report their findings to the end users of financial statements.
It is our belief that the "Investigative Team Approach" is the most effective solution when the services of Forensic Accountants ( FAs ) are engaged. Berkeley's Fraud Investigators, who are expert examiners, interviewers, interrogators and negotiators in the highly specialized fields of Commercial Crime, Business Intelligence and Commercial Litigation, work in tandem with "FAs" who are specialists in accounting, legal and investigative procedures, and also possess the unique talent of "looking beyond the numbers" to understand the business reality represented by documents, people and organizations.
Berkeley's "FAs" are routinely retained by Corporations, Not-For-Profit Organizations ( including Charities ), Insurance Companies, Financial Institutions, Law Enforcement Agencies and numerous other government agencies, to analyze, interpret, summarize and report on complex financial and business related issues in a manner which is both understandable and properly supported. The practice requires a knowledge and understanding of "court procedures and rules of evidence", as the "FA" is often called as an expert witness.
Things to be Considered when Retaining a Forensic Accountant:
- The experience and qualifications of the Forensic Accountant;
- The "FA" should be retained as early as possible in order to achieve maximum benefit throughout the process, including a reduction in the overall associated costs. When retained in the early stages of Commercial Litigation, an "FA" can assist with Examinations for discovery, identify additional areas of damages, assist with settlement negotiations and provide a preliminary assessment of the quantum of damages;
- When an "FA" is required as an expert witness, then he or she should be given access to all relevant documentation. If the client imposes restrictions on the scope of the "FAs" examination & analysis, the court's acceptance of the findings may be impacted.
- When the client is represented by counsel, it is our recommendation that the "FA" be retained by counsel so that "Solicitor / Client Privilege" will be extended to the "FAs" work product.
Review Control Systems:
One of the initial tasks undertaken by our FAs upon engagement is to conduct a complete review and analysis of what are, at times, very "Complex Financial Systems and Procedures", which often mask internal control issues. The "FA" will act as an independent advisor by providing recommendations to resolve potentially far-reaching control weaknesses.
Financial Crimes Investigations:
Berkeley's Investigators and "FAs" will analyze Financial and Accounting evidence, in connection with crimes involving Money Laundering, Fraud, Theft, and Embezzlement, during which time various interviews will also be conducted. These interviews will be with employees from various departments throughout the organization, who may simply be a witness to confirmed or suspected irregularities or might actually be on the "List of Suspects" based on the findings.
While engaged in the "Forensic Investigation / Audit process", Berkeley's team of Investigators and "FAs" are searching for any evidence to indicate the following:
- Employee Fraud
- Financial Statement Fraud
- Kickbacks / Secret Commissions
- Insurance Fraud
- Theft of Trade Secrets / Proprietary Information / Sensitive Data
- Corporate Espionage
- Suspicious Activities
- Fraud / Kick Backs / Embezzlement
- Suspect Contractor Relationships / Secret Commissions
- Conflicts of Interest
- Expense Accounting Irregularities
- Misappropriation of Corporate Assets
Preparation for Court:
Upon completion of all examination and analysis efforts, Berkeley's team of Investigators and Forensic Accountants provide clients with comprehensive reports of their findings, together with exhibits, which are created on a self-loading & interactive CD-Rom, unless instructed otherwise, to allow for an effective and organized presentation for court purposes.
The Ontario Superior Court of Justice and the Ontario Court of Justice have accepted Berkeley's Forensic Accountants as "Expert Witnesses".
Director Liability / Corporate Governance:
The last few years have witnessed an explosion of corporate scandals. Class actions, legal proceedings and investigations have grown exponentially since the early 2000s and regulators have broadened the scope of "personal accountability" to include corporate directors.
Everyone in the corporate world is fully aware of the massive accounting frauds that floored giant companies "Enron" and "WorldCom". These two high profile scandals are perfect examples of why corporate Officers and Directors have a fiduciary responsibility to the owners, shareholders and various stakeholders of both private and public companies, to act on and investigate all incidents of known and / or suspected irregularities or wrongdoings, which have had a "financial effect" on the organization.
All Officers and Directors should act diligently and expeditiously, utilizing all investigative resources at their disposal, to minimize any potential losses or damages to the corporation.
Ten WorldCom directors offered to personally reimburse $18 million as part of a class action settlement negotiation with investors who filed proceedings following the corporation's bankruptcy in 2002. Plaintiffs insisted on a condemnation against members of the board.
Nortel launched lawsuits against its ex-directors ( twelve executive officers ) to return their "corporate bonuses" and the organization ended up enlisting an "ethics expert" to help the company rebuild its image.
Media coverage throughout the world also highlighted the transgressions of International "Corporate Executive / Celebrity Homemaker Diva" Martha Stewart, and she was eventually incarcerated for obstruction of justice. At the same time, the Canadian Criminal Code was amended to include "new offences" pertaining to "Insider Trading" and related capital market misconduct.
North American regulators have scrambled to implement corrective legislation with greater due diligence requirements and stronger penalties for illegal and / or questionable practices. After more than two years of reflection and consultation between the Exchanges and the Canadian Securities Administrators ( CSA ), the CSA finally published new harmonized corporate governance practices for Canada, applicable to all reporting issuers, in order to restore and maintain investor confidence and thwart future scandals. The "CSA" expect the New Corporate Governance Practices to be adopted and to come into force for the proxy solicitation period of 2005.
As corporate "ethics" and "accountability" have become new "buzz words" in today's corporate culture, directors need to take precautions to limit their personal liability. These measures could include demonstrating compliance with codes of conduct and ethics and other measures of due diligence.
The public is paying a great deal more attention now and is monitoring reporting issuers as these new principles of corporate governance practices are going to have a tremendous impact on corporations and their directors.