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John Holden is an associate director at forensic accountants Smith & Williamson.
He is responsible for managing and developing the firm’s forensic technology service. Your Witness editor Chris Wilson met him and his colleague, forensic accounting expert Graham Hain, to talk about this growing area of expertise and other disciplines.
CHRIS began: Smith & Williamson are well known as forensic accountants but not so much for other areas, such as technology. Could you expand on this area and its importance in terms of the company’s expert witness work?
Forensic technology is a fairly young discipline in the professional practices arena. It came to the fore with the advent of Sarbanes-Oxley and changes to the Civil Procedure Rules, but its principles are well established. Pioneering work by law enforcement officials and private practitioners some 13 years ago helped to create the Association of Chief Police Officers’ good practice guidelines, which form the basis for the sound forensic techniques we use today. In order to provide a cost-efficient, cohesive investigation for our clients, it is essential that electronic evidence follows those principles. Forensic accounting and technology experts work together to provide a complete solution to a case; that is best achieved by them sitting within the same team.
The computer forensic capability supports our accountants working on commercial disputes as well as fraud and financial investigations. This is in addition to its ability to be a successful business in its own right.
At Smith & Williamson we felt it was very important to supplement our accounting practice with computer forensics, and as with all other areas of business that we choose to go into, the computer forensic offering is credible and robust.
There are a number of areas covered that are of particular interest, such as personal injury and asset tracing: could you expand on those.
As we are all aware, the vast majority of written information is now produced and stored electronically.
Therefore, in virtually any type of dispute where financial records, emails and other data provide legal teams and the experts they appoint with evidence, a large proportion will be held on computer. We see examples of computer forensic skills and forensic accounting expertise applied in a complementary way in contractual disputes, employment disciplinary matters, asset-tracing assignments, fraud cases and regulatory investigations.
Does the crossover of disciplines occur often in the company’s expert witness work, and are there advantages to being able to deal in-house rather than subcontracting work to other parties?
When individuals take expert appointments, they need to know exactly what they are being asked to give an opinion on, and to ensure that it falls within their area of expertise.
No one accounting expert will be able to give expert evidence on taxation, auditing, valuation and insolvency matters, regardless of whether the instructions cross two separate disciplines, such as accounting and computer forensics.
What is important is that all elements of the team work together. Take, for example, an asset-tracing case, which may involve solicitors, barristers, forensic accountants, computer forensic professionals, insolvency practitioners and enquiry agents. Normally the solicitors are co-ordinating the activities of the others, who each have an important role to play.
The computer forensic specialists may be used to extract financial data from an insolvent company’s computer system. The forensic accountants will then analyse that data and may establish that monies were used to purchase property and other assets abroad. At Smith & Williamson we have found that teamwork between computer professionals and accountants is very important. It certainly helps when both sets of professionals have worked together before and know each other’s capabilities.
Some forensic accountants claim to have computer forensic expertise. In reality they use a sub-contractor or, worse, the firm’s IT administrator, who “knows a bit about computers”.
Sub-contracting or having solicitors engage a computer forensic boutique separately can work well, but there is often no substitute for the experience of having previously worked together.
Where it does pay to sub-contract is in the use of enquiry agents, particularly when tracing offshore assets. Just as no accountant can be an expert in the various disciplines of the profession, no enquiry agent will have the detailed knowledge to source all available records in every country.
What kind of cases include the use of both of those areas?
One type of investigation that we see a lot of is director misfeasance. This often comes to light when our restructuring and recovery services (RRS) team is brought in to administer a business. Forensic technology personnel act to secure areas of data which are either immediately relevant or which are thought likely to become relevant in the future. That information, together with any hard-copy data, is then sorted and reduced before being passed to the forensic accounting experts. Emails, word-processor documents, spreadsheets and accounting systems and the like are restored and examined, which enables us to recover a full picture of events.
The business knowledge of the RRS team and the technical and investigative capabilities of the forensic services team combine to provide a complete solution to the problem of getting to the facts of a case without any data going outside of the organisation.