When Chris Fordham first opted to go into forensic accounting, the field’s profile was nothing like it is today. By specialising in an area which focuses on identifying and investigating illegal practices in the business world, he was something of a pioneer.
Now, with a growing emphasis on the need for businesses to ensure compliance and root out instances of fraud, corruption, money laundering, IT-related scams and other nefarious schemes to ‘cook the books’, demand for his particular brand of expertise has never been greater.
“We provide both proactive and reactive services and are usually called in when a company has a whistle-blower or needs to undertake an independent investigation,” says the Asia-Pacific managing partner for fraud investigation and dispute services (FIDS) at leading international firm EY. “Clients want to be informed about what is going on and put in a position to respond accordingly.”
Subsequent steps obviously depend on what the investigation unearths. The client may decide to take steps towards recovery, or begin litigation or dispute proceedings. Complex calculations may be involved to understand potential shareholder losses and possible restitution. Cases can centre on issues ranging from bribery and embezzlement to IP (intellectual property) theft or breaking trade sanctions. Or it may be that everything ultimately turns on different accounting approaches and interpretations and what is most appropriate in the circumstances.
“The important thing for us is to detect and prevent,” Fordham says. “The issues are largely financial in nature, often relating to losses or transactions. But at some point, the client will say they want to prevent this in future, so we are also ready to help with advice and recommendations.”
To that end, his 400-strong team includes experienced accountants and auditors, and also individuals with a background in law enforcement, management consultancy, tax regulation, commercial transactions and journalism. There are experts in forensic technology, who have the skills to recover data, spot potential discrepancies and trace fraudulent behaviour or misuse of systems. Former lawyers are on hand to ensure that no one is in any doubt about what is and is not permissible in different countries or across jurisdictions. And the firm’s fast- growing international contingent of around 4,000 FIDS specialists is able to provide on-the-spot insights and detailed follow-up whenever necessary.
These days, clients include multinationals and big brands, whose cases typically make the headlines, but also smaller local companies which recognise the importance of taking prompt action to crack down on any hint or suspicion of malpractice.
“What that displays is increasing awareness of the value forensic accountants bring to the process,” Fordham says. “Encouragingly, we also see growing enforcement of local regulation in mainland China, which is a significant factor in driving our business.”
Whatever the sector or location, some themes remain fairly constant. Cases involving employee theft and embezzlement or occupational fraud by the company cashier or chief accountant, who might forge bank statements or manipulate the audit process, are always common.
Nowadays, though, investigators must also be on the lookout for new types of crime or deliberate non-compliance. For instance, employees have been found to be applying their expertise in photoshopping and high-definition scans to copy and transfer a company logo or stamp to fake documents. Elsewhere, lack of attention to password security can be the cause of unauthorised purchase orders and fake invoices, which can form the basis of a network of kickbacks and under-the-counter payments for sales and procurement teams.
“For us, it is a red flag if some orders are placed by the purchasing department and some by the accounts division,” Fordham says. “We also look into issues linked to sales commission, vendors or distributors getting big discounts, procurement managers not enforcing required quality standards, and manufacturers working through resellers to book quarterly sales targets. All these can be telltale signs of a scheme to commit fraud or pay kickbacks.”
Besides that, of course, there are also the large-scale corporate cases perhaps involving the incorrect statement of assets or revenues in a deliberate, but misguided, attempt to mislead investors and regulators.
In recent years, focus has inevitably shifted to the banking and financial services sector, not only because of the fallout from the global economic crisis and consequent tightening of operating rules and compliance standards. Consequently, ever greater vigilance is needed to guard against money laundering and the flow of funds generated from human trafficking, sanctions busting and other forms of international crime.
“The risks don’t stand still,” Fordham says. “And, since every case is unique, you need the ability to move quickly up the learning curve.”
Over the years, he has had the chance to work with clients in a broad spectrum of industries, from pharmaceuticals and gas to manufacturing and financial services. Starting out in insolvency and restructuring in London in the early 1990s, Fordham gradually specialised in forensic accounting and accepted the offer to lead EY’s regional team in early 2009.
“When I first came to Hong Kong in 1998, there weren’t many people in the Asia-Pacific region in this line of work and, therefore, not a great deal of experience,” he says.
“That meant I was asked to do investigations and cases in different countries and, as a result, got to understand the local issues and nuances, the way business is done and how things can be manipulated. I still enjoy the work and can see there will be plenty of opportunities ahead for anyone going into this field.”
This article appeared in the Classified Post print edition as Call in the graft-buster.
