Services Forensic Accounting

Forensic Accounting

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HOW WE CAN HELP

Clients turn to BRI Forensic when they are facing litigation, arbitration and regulatory scrutiny.

They depend on us to provide expert accounting advice that illuminates the critical facts, quantifies any loss suffered and provides a reliable valuation of subject assets.

Our forensic services include Disputes and litigation and Investigation.

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Disputes and litigation
Investigations
Called to Account
FAQs

Disputes and litigation

We pride ourselves on quickly establishing the facts that lie at the heart of commercial disputes, synthesising that data and evaluating the consequential damage or loss suffered.

Our forensic accounting experts help you navigate the complexities of quantifying financial loss and will communicate solutions to complex technical issues in easy-to-understand language.

We understand the stresses and pressures associated with litigation and the importance of keeping you informed throughout the dispute. We tailor our services to your needs and proactively manage each engagement to deliver accurate, timely and cost effective reports. 

Experts services

We are experienced in providing a wide range of independent and consulting expert services and have given expert witness testimony across a broad spectrum of commercial disputes and litigation, including:

  • Breach of contract and competition law disputes
  • Business interruption insurance claims
  • Family Law
  • Fraud investigations
  • Insolvent trading actions
  • Intellectual property disputes
  • Post-acquisition / shareholder disputes
  • Shareholder oppression
  • Valuation

Past Experience:

Directors’ duties: dividend payments

The plaintiffs alleged that the directors of Dick Smith caused material prejudice to the company’s directors by paying the 2015 interim and final dividends, a breach of s254(T) of the Corporations Act. We were engaged by the defendant directors to opine on the methodology adopted by the directors for assessing the impact of the dividend payments on creditors’ interests and the adequacy of the information relied upon by the directors for taking those decisions. Paul played an instrumental role in preparing the two expert and joint expert reports, drawing on his technical accounting expertise, and his financial and corporate board reporting experience gained from working in Australia’s two largest financial institutions and the largest provider of vocational education in NSW. Our report was read into evidence unchallenged, with the Court finding in favour of the defendant directors.

Shareholder dispute: valuation

The plaintiff launched Supreme Court proceedings in relation to his rights as a shareholder of a large corporate group which included a unit trust, seeking to have the other shareholders purchase his interest after having been forced out of working in the business. The action was hotly contested with the value of the interest a key integer in the dispute. Jacqueline was engaged to prepare a valuation of the plaintiff’s interest and to critique the defendants’ initial and later updated valuations. Not only did Jacqueline identify that the defendants’ valuer made a fundamental error in the valuation methodology which materially understated his valuation (by some $5 million) – an error that the opposing valuer accepted and later adjusted – but her valuation was instrumental in achieving a successful settlement for the plaintiff, significantly in excess of the defendants’ initial offer. Had the matter gone to trial there was a risk that the defendants’ valuation reports may not have been admissible as there was evidence that the valuer’s independence had been compromised.

Damages for breach of employee agreement

The plaintiff, a local subsidiary of global refractory dryout and heatup business, alleged that it suffered losses as a result of breaches by a former employee of his confidentiality and non-compete agreement, and of his director’s duties (as a former director of the plaintiff). Paul was engaged by the defendant review and critique the report and damages quantified by the plaintiff’s expert. The matter, which settled prior to proceeding to Court, was favourable to Paul’s client.

Accounting interpretation

A shareholder’s dispute arose over the interpretation of the compensation payable to the directors under the shareholders’ agreement. Paul was engaged by the defendant to provide a report setting out his opinion on the interpretation of the disputed phrase in accordance with Accounting Standards and quantify the directors’ fee payable, which assisted his client achieving a favourable outcome.

Patent infringement

The applicants alleged that the respondents infringed the applicant’s patent in an equine and bovine feed distribution process. Paul was asked to quantify the damages suffered by the applicant. As the loss period extended back eight years and critical financial information was not readily available, Paul was required to undertake extensive financial analysis and modelling to quantify the damages under multiple scenarios, relying on a combination of general ledger financial data and related source documents. The matter settled after Court proceedings had commenced, with the respondent accepting a settlement offer from the respondent.

Investigations

When allegations of fraud or other misconduct arise, or if your business is exhibiting signs of financial distress, you need answers quickly. BRI’s Investigation services leverage our core restructuring expertise, data analysis and modelling skills to uncover the source of misconduct and root causes of business under-performance and value destruction.

We conduct our investigations with discretion and in a manner that minimises disruption to your business. We also work with you to develop strategies designed to mitigate the risk of misconduct from recurring and optimise value creation opportunities.

Investigation services

We have been involved in a range of investigation engagements, including:

  • Data modelling and analysis
  • Financial reviews
  • Providing expert reports for civil or criminal proceedings
  • Quantifying fraud-related losses
  • Reconstructing financial records
  • Solvency reviews
  • Transactional reviews, asset tracing and recovery

Past Experience:

Inquiry into Events at Earle Haven Retirement Village

We were appointed to to assist the Department of Health with its Inquiry into Events at the Earle Haven Retirement Village and their aftermath, following the retirement village’s collapse. We investigated and reported on the management and operational structure of the retirement village, the financial arrangements it had with a key outsourced service provider and the adequacy of controls it had in place to meet certain of its regulatory obligations. The majority of our recommendations for improved management of potential solvency issues in retirement villages were included in the Department of Health’s report to the Federal Minister.

Financial Modelling

Our client, which operated multi-storey car-parking stations across Australia, was concerned with the accuracy of the information used to calculate the occupancy payable under the Parking Space Levy Act 2009. The investigation required Paul to first analyse and test the data being collated by the automated and manual car parking systems, understand the nature of the data collected and form a view as to the accuracy and reliability of that information. Given a number of observed errors in the data collected from the company’s car parking systems, Paul developed a series of complex financial models to replicate the parking levy calculation.

Called to Account

Jacqueline Woods leads the Forensic Accounting team at BRI Ferrier, providing forensic accounting, expert witness and business valuation services. Going beyond the binary, Jacqui and her team apply their forensic lens to topical issues to serve up practical insights and fresh perspectives on all things forensic accounting. Tackling issues including directors’ duties, insolvent trading, business interruption, shareholder oppression and post-acquisition disputes, they Call to Account the broader commercial and board room implications of matters that come across their desks. They’ll also interview lawyers and other relevant business professionals, tapping into their expertise to bring you the latest thinking on current trends and emerging issues.

Click here to subscribe to the Called to Account series below

Episodes:

E1 - Preview
Jacqui Woods and Paul Croft, directors and partners in crime in BRI Ferrier's Forensic Accounting practice, preview their new vlog series, Called to Account. Coming soon!

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E2 - Insolvency through the lens of an unfolding crisis
In the video, Jacqui and Paul offer a fresh perspective on insolvency and a director's duty concerning insolvent trading, reflecting on insolvency in the context of an unfolding crisis. Paul also shares some relevant insights from his time investigating one aspect of the Dick Smith insolvent trading litigation.

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E3 - Anti-phoenixing legislation: impacts for directors and other stakeholders
In this podcast, Paul Croft talks to Marc Rossi, Restructuring, Insolvency and Recoveries partner at Hicksons, about what the new anti-phoenixing legislation means for directors and other stakeholders, particularly if they are to avoid falling foul of the new legislation.

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E4 - COVID-19 business interruption insurance claims
In this episode , Jacqui and Paul, Directors in BRI Ferrier’s Forensic Accounting team give an overview of the status of COVID-19 related business interruption insurance claims, highlight how issues of causation and proximity may impact damage quantification, discuss the possible ramifications of the recent UK Supreme Court judgment for Australian claimants and muse on the additional information potential claimants may need to produce to support their COVID-19 BI loss claims.

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E5 - Considerations for directors looking to rely on the Safe Harbour provisions
In this episode, Paul Croft is joined by Hannah Griffiths, Head of Restructuring and Insolvency at Gilchrist Connell, who shares some key insights about eligibility, evidentiary and other considerations pertinent to directors who may be looking on the Safe Harbour provisions. She also explains how the COVID-19 Safe Harbour provisions differ to the standard Safe Harbour provisions, and along the way, manages to smash a misplaced myth about Safe Harbour.

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E6 - Putting a value on privacy
Jacqui and Paul investigate our personally identifiable information might be valued in a litigation context. They provide some context as to the scale and cost of data breaches before presenting a framework and evaluating options for putting a value on our privacy in class actions involving data breaches, theft and/or misuse.

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E7 - Dividends and material prejudice
In this podcast, Jacqui and Paul discuss a number of critical insights emerging from the dividend case in the Dick Smith litigation, in particular, the concept of "material prejudice" included in s254T(c) of the Corporations Act and the potential hurdle it creates to paying and declaring dividends. Highly relevant to directors - particularly CFOs - is the approach adopted by the Court to assess the "reliability" of information provided to boards, as well as, the extent to which that information provides a reasonable basis for taking decisions about dividends. Usefully, the judgement also identifies a number potential mitigation actions directors might consider in circumstances where a breach under s180(1) and (2) may arise because the company has potentially been exposed to a breach of s254T(c).

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E8: Enterprise value v Equity value: explaining a commonly misunderstood business valuation concept
When shareholders or partners go their separate ways, disputes often arise over the value of commonly held assets. One of the causes of valuation disputes between the parties arises because they hold different views of what is being valued, bought or sold. In this episode, Jacqueline Woods, BRI Ferrier's valuation expert, explains the differences between "enterprise value" and equity value", a concept that is commonly misunderstood in business valuation.

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E9: Expert evidence update: learnings from recent judgements
There have been a number of cases this year that turn the spotlight on expert evidence, including issues related to inherent bias, expertise and experience and, the weighting given to, and admissibility of, expert evidence. In this podcast, Paul Croft shares his insights from the findings in two recent cases into expert evidence.

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E10: Shareholder disputes
One of the downsides of COVID-19 has been an uptick in shareholder acquisition disputes, with cash-strapped business owners seeking to exit businesses or look for ways to extract additional value by exploiting the shareholders agreement. This video looks at two of the more common causes of shareholder disputes and suggests some ways shareholders in private companies can reduce the risk and scope of costly disputes.

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E11: Shareholder disputes (Part 2): Mitigating the risk of post-acquisition surprises
Post-acquisition disputes often emerge at the time that completion accounts are prepared after an acquisition or where a buyer discovers new things about the business that weren’t disclosed during the due diligence process. Disputes may also arise over the computation of earn-out clauses and where there is an alleged breach of warranty or indemnity given in the Sale & Purchase Agreement.

This episode considers a number of the common causes of post-acquisition disputes and offers a few suggestions on how to avoid or mitigate such disputes.

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FAQs

Below are some frequently asked questions about forensic accounting. If you can't find the answer you're looking for, contact our team here.

Episodes:

What is forensic accounting?

In plain English, the term “forensic” means “relating to court”. As forensic accountants, we typically apply our skills, experience and expertise in a litigation context involving questions of an accounting, financial or commercial nature.

Most often, forensic accountants are engaged to quantify the damage or loss suffered because of the actions of another party, which includes litigation such as:

  • Breaches of contract, directors’ duties and trust, and misleading and deceptive conduct
  • Business interruption
  • Business valuation
  • Insolvent trading
  • Family Law
  • Post-acquisition and shareholder disputes
  • Investigating fraud and other white-collar crime.

Click here for further information about forensic accounting.

What is an expert witness?

When engaged as an expert witness, a forensic accountant will prepare an independent expert report expressing opinions on financial and accounting matters related to legal proceedings. If the matter goes to Court, the forensic accountant may also be required to provide oral evidence and be cross-examined on the opinions expressed in their independent expert report – hence the term ‘expert witness’.

When engaged as an expert witness, a forensic accountant must comply with Independent Expert Witness Codes of Conduct imposed by Australian Courts.

Click here for further information on expert witnesses.

What is a consulting forensic accounting expert?

A forensic accountant may be engaged as a consulting expert for a range of reasons including acting as an adviser, arbitrator, mediator or expert determiner where the services are not provided for use in the context of legal proceedings.

A consulting forensic accounting expert can be engaged as a “shadow expert” by a client or their lawyers, as part of their legal strategy, to review and critique an independent forensic accounting expert’s report. For example, the consulting expert may assist the legal team in developing questions or generating additional instructions to put to the independent expert. In those circumstances, the consulting expert executes the engagement in a partisan way because the consulting expert is not required to give evidence and is not bound by the Courts’ Codes of Conduct for experts.

What are investigation services?

A forensic accountant may be called on to assist in the investigation of illegal or unethical behaviour such as fraud, other white-collar crime and professional negligence. Because of the nature of the investigation, the services may be conducted before legal proceedings have been commenced. However, when engaged to provide investigation services, the forensic accountant should conduct their investigation with the reasonable expectation that the investigation will result in legal proceedings brought before a Court.

In Family Law disputes or disputes between business partners a forensic accountant may be called upon to investigate and report on the movement of cash and explanation of expenditure.

Does a forensic accountant always have to provide opinions?

Forensic accountants are sometimes called upon to provide evidence that requires them to utilise their training, expertise, study or experience without providing an opinion or giving evidence. Examples include:

  • Extracting, collating or providing a summary of a company’s trading history,
  • Preparing financial models and calculations from a given set of parameters, and
  • Setting out the accounting standards that may be applicable to the company’s circumstances.

In these instances, no opinion is expressed as to the factual accuracy of the financial information or the extent to which the accounting standards may have been applied in line with the requirements of the accounting standard.

When should I engage a forensic accountant?

We strongly believe in engaging a forensic accountant earlier, rather than later, in the proceedings. Ideally, during the process of deciding whether to launch proceedings. In many instances, the nature of the legal dispute is quite complex, the merits of the arguments untested and the approach to quantifying the damages challenging. Early engagement allows us to better assist the lawyers in developing their legal strategy, quantifying losses in the statement of claim and understanding and overcoming evidentiary obstacles.

How much does a forensic accounting report cost?

The costs associated with preparing a forensic accounting report can diverge significantly, driven by a range of factors, including the nature and complexity of the litigation, the scope of the questions being asked (influencing the number of hours required) and, of course, hourly rates. Further, the more complex the matter, the greater the involvement of senior staff. We do, however, seek to leverage the more junior staff where possible to deliver cost efficient reports.

For non-Family Law matters, our weighted average hourly rate is in the range of $440 to $490 (excluding GST) and, on average, a first draft of an expert report might take between 70 and 100 hours to complete. On those estimates, a forensic accounting report might cost on average between $30,000 and $50,000 (excluding GST).

Click here for further information on our costs.

What happens if I’m not sure about the merits of my litigation?

It’s understandable that lawyers and/or their clients can be hesitant about engaging a forensic accountant. That’s because there can be a whole lot of uncertainty around satisfying the evidentiary requirements, the chances of success and even if successful, whether the damages awarded will justify the costs involved –including the financial, mental, and emotional costs associated with prosecuting or defending a claim.

At BRI Ferrier Forensic we offer a phased approach to forensic accounting engagements, which empowers the client to better control the costs and manage the risks and uncertainties associated with litigation.

Click here for further information on how we can phase and tailor our work to your needs.

What is a loss of opportunity?

An account of profits is an equitable remedy that seeks to ensure that people in trusted positions who breach their duties, or those who infringe intellectual property rights, don’t benefit from their wrongful conduct. It is commonly sought in disputes involving breaches of fiduciary duties, the theft or “passing off” of intellectual property and misuse of confidential information.

It is an alternative remedy to damages that seeks to serve justice by returning to the plaintiff any profits made by the defendant in committing the wrongful act. As such, it differs to a calculation of compensatory damages which quantify the losses suffered by the plaintiff from the defendant’s misconduct.

Compared to a damages calculation, quantifying an account of profits can be more complex because the profits made by the defendant need to be apportioned to between the infringing and non-infringing elements of the product.

Click here for further information on accounts of profit.

What is the appropriate measure of damages?

The measure of damages should align with the remedy sought by the parties, based on the nature of the wrongful conduct.

Where breaches of common law duties arise, such as a breach of contract and misrepresentation, the measure of damages generally seeks to put the plaintiff in the same position it would have been, but for the misconduct. However, that rule is not rigid, particularly where a concurrent claim is brought in contract and tort. Where breaches of common law fiduciary duties arise, the fiduciary may be liable, for example, to compensate the plaintiff for losses suffered or to return to the plaintiff any profits made from the breach.

Where statutory or legislative breaches arise, for example, under the Corporations Act and Australian Consumer Law, the measure of damages will be determined by the specific provision breached. Accordingly, the approach to quantifying damages can diverge significantly.

What is an award of damages?

Damages are a legal relief referring to the sums, assessed in monetary terms, paid to a successful party arising from the wrongful conduct of another party, such as breaches of contract and fiduciary duties, misrepresentation as well as breaches of statutory and legislative provisions.

Highly relevant to the task of quantifying damages is the plaintiff’s ability to establish that:

  • The defendant’s actions were directly connected with, or substantially caused, the loss;
  • The plaintiff took reasonable steps to mitigate its losses; and
  • There is a likelihood that the losses resulted from the breach.

Further, the Court may reduce or apportion the award of damages if the plaintiff did not take reasonable steps to mitigate its losses or the defendant is successful in proving contributory negligence or concurrent wrong doing.

What is a loss of opportunity?

A claim for loss of opportunity can arise in consequence of a contractual breach, negligence, personal injury, or misleading and deceptive conduct where the wrong results in the loss of a chance to profit, gain or benefit.

Where a breach of contract arises, a plaintiff need only prove the breach to be entitled to nominal damages for the lost benefit. This is so even if the plaintiff is unable to prove what, if any, value, performance of the contractual promises would have had.

In contrast, a plaintiff’s failure to prove damage in a tortious claim (such as negligence or breaches of Australian Consumer Law) precludes an award of compensation. However, it remains open to a plaintiff to assert a loss has been suffered in respect of the right or opportunity to acquire a commercial benefit (or avoid a detriment)

To prove a loss of opportunity, a plaintiff must overcome three hurdles to persuade the Court that the asserted outcome was more than hypothetical:

  1. There was a commercial opportunity that was more than speculative;
  2. That the lost opportunity would have been pursued; and
  3. The extent to which the opportunity would have been successful, had it been pursued.

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who we work with

Works closely with a range of business stakeholders, including financiers, solicitors, accountants & creditors, as well as the directors of businesses in financial distress.

Financiers

Empowering financiers with tailored solutions to secure their investments.

Solicitors

Partnering with solicitors to navigate complex legal landscapes with precision.

Accountants

Collaborating with accountants to ensure accurate financial management.

Creditors

Assisting creditors in recovering their dues efficiently and effectively.

Company Directors

Guiding company directors through financial distress with expert advice.