The short answer to when to instruct a forensic accountant is early: as soon as a case turns on figures that someone will have to prove, test or explain. However, that moment looks different in every type of case. So this article follows one fictional family business through five very different disputes, showing where forensic accounting makes the difference in each.
We invented the company and the people in this story. The questions they face, though, are the ones solicitors bring to us across personal injury, commercial, crime and fraud, tax and divorce matters. Along the way, we answer when each type of case needs an expert, why the same accounts can mislead, and what to have ready when you call.
How can one business end up in five disputes?
One business can face several disputes at once, because the same accounts sit behind every financial question it faces. Take Anna, who owns and runs a family joinery company with one fellow director. The business is profitable, and she pays herself a modest salary topped up with dividends. Over the next three years, however, five separate problems will land on five different desks. As you will see, all of them lead back to the same set of accounts.
When does a personal injury claim need a forensic accountant?
A personal injury claim needs a forensic accountant as soon as it is clear that the loss depends on more than payslips. That is when to instruct a forensic accountant, and Anna’s claim shows why. A road accident leaves her seriously injured and unable to work for many months. Her payslips show only that modest salary, so a claim built on them alone could seriously understate her loss. People often describe owner-directors as self-employed, but they are not, and the distinction matters. Anna’s income is a mix of salary, dividends and profits retained in the company.
We analyse how the business performed before and after the accident, separate the effect of the injury from wider trading conditions, and calculate her loss of earnings and any pension loss. Equally, defendant solicitors ask us to review such claims and test whether the loss really flows from the accident.
Had the accident been fatal, similar analysis would have underpinned a fatal accident claim for her dependents under the Fatal Accidents Act 1976.
When does a commercial dispute need a forensic accountant?
A commercial dispute needs a forensic accountant as soon as the claim turns on how much a breach actually cost, ideally before any figure goes into correspondence. While Anna is away, a major supplier breaches its contract and the company loses a valuable fit-out project. A breach is easy to describe. The loss is harder to quantify.
An expert must quantify lost profits, wasted expenditure, increased costs and any reduction in business value on a basis the court will accept. Moreover, the other side’s expert will test every assumption: what would have happened but for the breach, the period of loss, the margin applied and whether the claimant mitigated its losses.
In a commercial claim, when to instruct a forensic accountant comes down to one risk: a case should not begin with a number nobody can support. Our commercial disputes team assesses the loss with reference to the underlying financial records and explains the reasoning in plain English.
We also review the other side’s figures to identify where the differences between the parties arise and to provide a view on the correct assessment. Our commercial work extends to professional negligence, business valuations and expert determination.
How do you know when to instruct a forensic accountant on suspected fraud?
Instruct as soon as the concern is credible, before anyone confronts the person under suspicion and while the records are still intact. While gathering records for the supplier claim, the company’s bookkeeper finds payments that make no sense: invoices from a business connected to Anna’s fellow director, and expenses with no obvious purpose. Suspicion is not evidence, and making an allegation without evidence is risky.
In a director theft investigation, we examine bank records, ledgers and directors’ loan accounts, identify payments that appear to have no legitimate business purpose and quantify the likely loss. Our findings can then support civil recovery, a criminal referral or negotiation.
Forensic accounting works on both sides of such cases, although in any real matter we would act on one side only. Defence solicitors frequently instruct us to examine the prosecution’s financial evidence. After a conviction, we also test the benefit figure and available assets in Proceeds of Crime Act cases, isolating legitimate trading that should not form part of the claim.
What happens when HMRC starts asking questions?
Take professional advice before entering into any discussion with HMRC. In Anna’s case, the company had treated those payments as business expenses, so its past tax returns may now need correcting. Understandably, the directors want to know where they stand.
We assist individuals and companies in all types of HMRC investigations, including civil investigations of fraud under Code of Practice 9, VAT and PAYE matters, and voluntary disclosures. We then assist in the negotiations, with the aim of reaching an acceptable settlement.
When does a divorce need a forensic accountant?
On a divorce, when to instruct a forensic accountant depends on the assets: instruct once it is clear that a business interest will be central to the case, and before anyone builds offers on a headline figure.
For Anna, the strain of those years takes its toll and her marriage ends. Her shareholding now sits within the matrimonial pot, and its value is rarely the only question. The amount Anna can safely extract, the tax a sale or transfer would trigger, and whether a theoretical market value is fair can all shape the settlement that the court considers under section 25 of the Matrimonial Causes Act 1973.
We provide business valuations for one party or as a single joint expert, advise on the tax aspects of divorce, and help with compiling the information for Form E. In addition, we review the other party’s Form E to identify what further enquiries, if any, are needed.
Where relevant documents can be provided, our divorce investigations can also check disclosure for accuracy and completeness.
Why does one set of accounts matter so much?
One set of accounts matters because all five disputes rely on it, yet each one reads it differently. This is the real lesson of Anna’s story. For example, a dip in profit could reflect her injury, the supplier’s breach, money taken by a director or a tax adjustment.
Attribute that dip to the wrong cause and the error travels. A schedule could count a loss twice, or a valuation could rest on profits that do not reflect the true position of the business. That is why knowing when to instruct a forensic accountant matters: an expert can separate those effects before the figures harden into schedules, pleadings and disclosure.
What should you have ready when you instruct?
You do not need a complete file before you call. In most cases, the following is enough to start the conversation:
- the issue in dispute and the relevant court dates;
- the financial documents you already hold, such as accounts, tax returns and bank statements;
- any figures already put forward, including the other side’s schedule or report;
- the output you need, whether a CPR report, a desktop report, a review of a claim or a letter of advice.
Frequently asked questions
When is the best time to instruct a forensic accountant?
As early as you can. We frequently add value when solicitors instruct us early, because we can help with key and complex elements of the case from the start. Even a short initial call can show whether the case needs expert input.
Do forensic accountants only act for claimants?
No. We act for claimants and defendants, and as single joint experts, in civil and criminal matters. We also accept both private and publicly funded instructions.
Is a forensic accountant independent of the party instructing them?
An expert must give an independent opinion. In civil claims, CPR Part 35 makes clear that an expert’s duty to help the court overrides any obligation to the person instructing or paying them.
Can one forensic accountant act for both parties?
Yes, as a single joint expert. Both parties instruct the same expert, which can help limit costs, and this is common for business valuations in divorce.
Do you need the court’s permission to rely on a forensic accountant’s report?
Usually, yes, if the report is to be used as expert evidence in court. In civil claims, CPR 35.4 says that no party may call an expert or put in an expert’s report without the court’s permission. Family proceedings have their own rules on expert evidence in Part 25 of the Family Procedure Rules, which also require permission. Advice that is not intended for court, such as a letter of advice, is different.
Talk to us before you instruct
Frenkels Forensics has over 40 years of experience supporting solicitors, barristers and their clients across personal injury, commercial, crime and fraud, tax and divorce matters. If a case of yours turns on the numbers, we would be glad to talk it through early.
To discuss when to instruct a forensic accountant on your matter, or to ask about our free seminars for legal practitioners, call us on 0330 118 8200 or email help@frenkels.com.