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Forensic Accounting Case Studies

Forensic Accounting Case Studies

Tax fraud

A tax payer who was under investigation by the National Crime Agency (NCA) for tax evasion engaged Ensors as forensic accountants to assist. The nature of the case and the sums involved was such that HMRC had passed the matter to the NCA to resolve. The initial estimates of the potential liabilities for tax evaded amounted to in excess of £2m.

An analysis was carried out on a substantial amount of data covering five years, including 80 bank accounts, trading records and property transactions. A report was produced on the under declared tax liabilities and represented the client in the negotiations with the NCA. This case resulted in a final settlement of less than a quarter of the original assessments.

Employee fraud

Ensors were engaged by a substantial group to investigate a suspicion of employee fraud. While there was initially no suspicious transactions, the company had become aware of criminal proceedings against the employee in relation to a previous employment.

An investigation of the company financial records was undertaken including sample checks on banking transactions, cash requests and purchase invoices. Within a week, we identified a number of fraudulent transactions in excess of £100,000 and also identified failings in the banks processes in relation to the mandates. Ensors successfully provided evidence to assist in the recovery of monies from both the employee and the bank.

Professional negligence claim against tax advisers

Ensors were engaged by the defendant to act as an expert witness in a claim for approximately £500,000 against the tax advisers by their clients in relation to a tax scheme.

The case related to transactions entered into nearly a decade earlier, Fiona Hotston Moore was able to draw from her own experience working as a tax adviser in relation to film finance in the relevant time. Fiona prepared a report to cover her opinion on how the tax legislation applied to the transactions anticipated and undertaken. Equally helpful, she was able to explain how the relevant practices and political environment in relation to film partnerships had changed over the last decade. Fiona provided a joint report with the other party’s expert and the matter was settled shortly thereafter.

Money laundering

Ensors were engaged to provide an expert report to assist the court in relation to criminal proceedings for substantial money laundering. The report was required to give an opinion on the extent of funds laundered through casinos and other means.

Ensors were able to review the records and provide an analysis of the transactions, it was suggested that the sums involved were substantially lower than the sums initially estimated by the prosecution. We were then required to illustrate via diagrams and graphs to explain the movement of funds.

Auditor professional negligence

Ensors were engaged by the claimant to provide an expert report on whether the audit was in accordance with the standards of a reasonably competent auditor and to quantify the loss arising. In our report we identified substantial failings in the audit such that the financial statements contained a material misstatement and substantiating a resulting loss in excess of £10m.

Errors identified included:

  • A failure to demonstrate appropriate professional skepticism, A failure to set and use an appropriate materiality level which then undermines the whole audit process;

  • A failure to follow the firm's audit guidelines and manual;

  • A failure to investigate errors arising in the sample during audit testing;

  • A failure by the audit partner to investigate questions or review points raised by audit team members; and

  • A failure to adequately audit the going concern assumption upon which financial statements are normally based.

Health company valuation and expert report

Ensors were instructed by lawyers to provide a Single Joint Expert report for matrimonial purposes. The report incorporated a valuation of a Company deriving the majority of its income from an NHS contract and also gave an indication of profit extraction available in future years.

The report included valuation on two bases; value if the NHS renewed the contract and value if the contract was not renewed.

Technology company valuation and expert report

Ensors were instructed by lawyers to provide a Single Joint Expert report for matrimonial purposes. The report related to issues regarding a technology company. Ensors provided a valuation of each parties shareholding, a indication of the taxation which would crystallise on disposal of the shares and a discussion on the extent that the liquidity of the company could finance the sale of one party’s interest to the other.  

 

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