Forensic Accounting - Investigations of Improprieties

Forensic Accounting – Investigations of Improprieties

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Overview
Case & Project Experience
Associated Professionals

Public and private companies, as well as not-for-profits and public institutions such as municipalities and school districts, face constant scrutiny from a myriad of stakeholders. These include competitors, regulators, the news media, shareholders, and employees. Our forensic accountants are frequently retained to aid management or an audit or governance committee in evaluating the impact of a suspected error or irregularity. With our assistance, these governing bodies may also assess the risk that internal financial personnel or the entity’s system of controls contributed to the alleged irregularities.

Hemming Morse’s experts are uniquely suited to assist counsel and business professionals in these types of investigations and related services. Our team is comprised of accounting and auditing professionals with deep and specialized experience, including: accounting and auditing standard setters, government regulator and enforcement professionals, corporate accountants, valuation experts, and experienced auditors. We bring our familiarity and expertise to our interactions with internal and outside counsel, as well as outside regulators when necessary. Additionally, our experts have provided testimony regarding these types of issues in court or in arbitration as necessary.

Our professional services include:

Analyses requiring the application of GAAP or other financial reporting frameworks arising from business disputes, including merger or employment-related allegations;
Complex GAAP and International Financial Reporting Standards (“IFRS”) accounting consultations;
Bankruptcy-related investigations, including those involving questions regarding solvency and alleged fraudulent conveyances;
Monitoring and related evaluation of internal controls;
Royalty examinations and investigations of contract compliance;
Services in support of Audit and Special Committee-related investigations involving questions of GAAP compliance and internal control over financial reporting, including investigations arising from Securities & Exchange Commission (“SEC”) inquiries and whistleblower claims;
Shareholder-related investigations involving questions of corporate compliance with GAAP, IFRS and internal control over financial reporting (“IFRC”) required under the Sarbanes-Oxley Act of 2002 (“SOX”), including expert consulting in connection with securities class actions and other claims;
Testimony at trials or other proceedings, including development of schedules and graphics to clearly communicate complex issues

Throughout our work, we provide an objective and knowledgeable assessment of applied professional standards, fortifying our opinions and conclusions with extensive research, data and investigation, our experts’ experience, and diverse resources across the firm.

Business Dispute Services - Post Acquisition Earn-Out Dispute

After a former majority shareholder raised questions regarding the triggering of earn-out awards dependent on certain post acquisition earnings targets, Hemming Morse was hired to evaluate the acquired entities’ financial reporting results under GAAP to assist in evaluating whether the earn-out award triggers had been met. Our team analyzed several specific accounting areas, including revenue recognition, customer product returns, and inventory.

Accounting Investigation - Management Consulting Services

Hemming Morse was retained by independent counsel on behalf of the Audit Committee of an SEC registrant. In this instance, the SEC had opened an accounting inquiry regarding the entity’s revenue recognition accounting. Our team of forensic accountants assisted counsel in identifying data relevant to the investigation, including access to the general ledger and definition of email search terms. Thereafter, we participated in interviews, worked with relevant company personnel, and interfaced with the company’s external auditors. Ultimately, we worked with the Audit Committee to assess the need for restatement of the company’s financial statements and presented our findings to the SEC.

Forensic Accounting Services

Hemming Morse professionals were hired to undertake a forensic accounting investigation and financial record reconstruction project for a $250 million Ponzi scheme. We supported the Court Appointed Receiver’s efforts to identify sources and uses of funds, recover assets for benefit of the Receivership Estate, and distribute recovered funds to victims. Our team also prepared and presented analyses related to civil and criminal actions resulting from the fraud.

Regulator Actions

Hemming Morse has been retained by several regulators, including the SEC, FDIC and PCAOB, to evaluate adherence with professional auditing and/or accounting services. In connection with these services, our team has provided expert consulting services in connection with several areas of GAAP, including accounting for loans, investments, inventory, fixed assets, and revenue recognition.

Accounting And Disclosure Consulting

Hemming Morse professionals have consulted with public issuers to analyze accounting transactions relative to the applicable professional accounting standards and literature, and provided guidance on addressing the appropriate financial reporting. Our team has also evaluated financial statement footnotes and provided feedback and guidance to improve the transparency, accuracy, and relevance in the financial statement disclosures.

Business Disputes Services - Post Employment Dispute

In connection with a former Chief Executive Officer questioning whether certain post-employment performance goals had been achieved, Hemming Morse was hired to evaluate the former employer’s operating results under GAAP. The team analyzed several specific accounting areas, including revenue recognition and stock-based compensation.

Accounting Investigation - Audit And Special Committee Investigation Services

In the context of an SEC inquiry, DOJ investigation, and $1 billion financial statement restatement, Hemming Morse professionals were hired to analyze and assess the accuracy of a company’s historical accounting and disclosures. We oversaw the completion of independent actuarial analyses, identified internal control and operational weaknesses, and directed the preparation of a remediation plan.

Criminal Allegations

Hemming Morse was retained by outside counsel for a private company that suspected an employee had misappropriated significant funds. Through interviews with management, our team of forensic accountants was able to assist counsel in defining the scope of the investigation. In this case, the employee had established fictitious business entities. Consequently, we coordinated with the actual vendors to confirm actual remittances paid by the employee as compared to the amounts paid by the company to the fictitious entities, identifying the amounts that were actually payments to the employee. Ultimately, we prepared materials to summarize our findings that were submitted to the U.S. Department of Justice in support of the company’s efforts to obtain restitution.

Securities Claims

In connection with a class action dispute involving a publicly traded company’s accounting for share based compensation, Hemming Morse provided expert consulting services, including expert testimony regarding whether the company’s accounting complied with relevant GAAP. While not specific to this matter, our professionals have evaluated financial reporting and the independent financial statement audits of publicly traded and privately held companies across various industries, including aerospace, biotechnology, energy, financial services, retail, manufacturing, oil and gas, pharmaceutical, and technology businesses.