When you think about financial forensic professionals, you aren’t alone if it evokes images of high-profile crimes involving large corporations, the IRS, the FBI, and other branches of law enforcement. Generally, the results of the investigation may be used in a court of law, but, at its core, financial forensics is an investigative methodology that allows a qualified professional to follow the money to definitively solve a matter of investigation, whether criminal or civil. Contrary to what you may think, financial forensic services are often more beneficial to small organizations. And while fraud definitely comes into play, financial forensic services go well beyond fraud investigations.
Anti-Fraud Measures & Internal Controls
On average, smaller organizations don’t employ the same anti-fraud measures that larger organizations do. But these measures can help you avoid incredibly costly scenarios. According to the ACFE 2020: Report to the Nations, the median loss due to business fraud is $125,000, and, on average, it takes 14 months before the fraud is detected.
Internal controls help business owners bolster operational efficiency and productivity and meet their financial and operational objectives. They are integral to every aspect of business, not just finance and accounting. According to the same ACFE report, more than half of all occupational frauds came from these four departments: operations (15%), accounting (14%), sales (11%), and executive/upper management (12%).
A financial forensics professional can review your internal controls and propose processes to ensure your organization’s resources are monitored and measured and help identify and protect your organization’s assets against fraud. One example of a finding and recommendation, is it’s best practice not to have the same individual oversee accounts receivable and accounts payable. By segregating these duties, you help protect your business from fraud risks like embezzlement or money laundering.
Resolving Shareholder Disputes
A financial forensic professional can help collect relevant information to provide the assistance needed in an investigation related to a shareholder dispute. A breach of fiduciary responsibility is a pervasive issue shareholders experience. When it comes to a company’s financial affairs or misspending of funds, all shareholders and partners could become liable for the outcome. Disputes related to the value attributed to the business and the individual parties’ interest in the business can also arise. A financial forensic professional can investigate your financial reports, combing through evidence of loss and possible fraudulent activities, and identify the person/people involved in said wrongdoings. In addition, a forensics expert can help mediate differences in opinion in interpreting shareholder agreements.
Working with a financial forensic professional from the very start can prove more beneficial, but they can also be appointed at any time during a shareholder dispute. They also serve as expert witnesses during a litigation process, answering questions on your behalf under cross-examination.
Alternative Asset Advisory
What is the true value of our business assets? What about illiquid, difficult-to-value investments and complex securities? Throughout the extensive valuation process, conflicting financial documents and statements can arise, which is where a forensic professional can help. The trained experts will follow every digital and paper trail to detect and question any financial discrepancies often overlooked by others. A financial forensics professional can provide an unbiased view with a thorough investigation.
Buying or Selling Your Business
Attempting to sell your business can be challenging when it comes to proper market value and the needed support for negotiations. M&A activity falls hand in hand with knowing the actual value of your business. Financial forensic professionals can play a leading role in determining a fair and logical valuation of a company by examining all the evidence and facts and providing a fair, unbiased, professional opinion. When your financial forensics team also specializes in business valuation services, they can provide the support you need to navigate the ins and outs of such a huge endeavor.
Contact LGA For Your Forensic Accounting & Litigation Support Needs
Fraud can destroy your company, cripple your finances, and wipe out your savings. And disputes and deadlocks over shareholder interests and the value of your business and its assets can keep your business goals just out of reach. LGA’s Valuation, Financial Forensics, and Litigation Support Team can help business owners search for truth behind the numbers. We also partner with lawyers to provide expert witness services, both consulting and testimonial, and valuation services for marital or shareholder divorce, dissident shareholder or partner matters, or complex financial issues.
As a Master Analyst in Financial Forensics, I help clients search for potential fraud, identify and trace funds for asset quantification, and prepare analysis for litigation support. As a Certified Valuation Analyst, I also help business owners by providing alternative asset advisory, due diligence, and business valuation services. Contact me today to discuss your financial forensic needs.
by Ross Yogel, MBA, CPA, CVA, MAFF
