Forensic accountants: an expert update Barbara Relph*
Barristers frequently have recourse to specialists outside their field of endeavour, including forensic accountants. I spoke with Jay Shaw, partner at Grant Thornton New Zealand about changes and new trends in forensic accounting and business valuations. Jay Shaw’s practice at Grant Thornton focuses on forensic accounting services in a wide range of matters including shareholder disputes, financial investigations, and relationship property proceedings. He has presented expert evidence in the High Court, Family Court and other dispute resolution forums; he is on the Business Valuation Board of the International Valuation Standards Council, a leading independent body in setting valuation standards globally.
What do forensic accountants do? The work undertaken by New Zealand forensic accountants falls into three general categories. The first, and most common instruction for forensic accountants, is the valuation of shares in unlisted companies or businesses. In the commercial sphere this may be where business partners have triggered the share transfer clauses in an ownership agreement. In the relationship property field, it might be to establish the value of assets for distribution, or in relation to the compensatory provisions in the Property (Relationships) Act, including s9A concerning separate property.
APRIL / MAY 2022
The second category is quantifying economic loss or lost profits. Shaw explains what that might look like. “An example would be a manufacturer, relying on another company’s product to make their own product, suffers lost earnings when the third-party product fails. In that case, the court must determine the sum of money required to compensate the loss. This will typically require establishing lost profits, effectively the net impact of lost revenues less saved costs, and this is where the forensic accountant comes in.” The balance of the work of forensic accountants is the broad range of accounting and financial matters where an expert opinion is needed. This encompasses financial investigations to identify the source and use of funds, establishing the capacity of a business to pay a fine, asset tracing, reconstructing financial records, independent review of transactions, and fraud investigations.
What do lawyers want from forensic accountants? A recent relationship property survey, conducted by Grant Thornton in collaboration with the Family Law Section of the NZLS, showed a shift in the core attributes legal practitioners demand from their forensic accountant. The research showed the most highly prized attribute is a good knowledge of relationship property law. Shaw
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