Forensic accounting

If you want to reduce legal and tax risks and make your business more transparent, effective and profitable we suggest you a forensic accounting of your local business unit.

Forensic accounting

Our definition: Internal audit

We help management of western parent corporations to understand if whether:

• the local management acts in compliaccordance with internal corporate policies, guidelines and legal requirements
• all business operations of its affiliated Ukrainian company in Ukraine are conducted transparently
• the internal audit system of the company is effective
• the company’s reported financial results are adequateproper
• there are no facts of abuses/kick-backs/bribes possible

Local characteristics: there are some typical indications for potential abuse:

• high level of cooperation with private entrepreneurs especially regardconcerning received marketing or other services
• negative financial result reported by local management for several years (despite lackmissing objective real (market) causes for losses and/or respective intercompany transfer pricing policy)
• low gross margin reported (despite lacking objective (market) causes for losses and/or respective intercompany transfer pricing policy)
• high rate or extreme growth of Administrative expenses (in case of budget overruspendn or unavailable budget)
• ongoing communication by local management for the need of unofficial cash transactions
• any customers/suppliers having informal relatedions towith the local management
• high level of outstanding debts of any local customers
• mismatch discrepancies of bank account balance being reported and according to the bank statements
• mismatchdiscrepancies between the stock being reported and the actual inventory
• inconsistencediscrepancies between the number of employees being reported and actual number of employees
• bonuses and additional benefits granted to the employees beyond the labor contracts
• inconsistencediscrepancies between sales prices in official price-lists and invoices to customers (high discounts)
• no tendering procedure for the selection of key suppliers
• violation of limit for approval in accordingance to the charter
• conduction of non-typical business operations, without permit from shareholders

Doing forensic accounting we help our Client to procure certainty regarding the above mentioned items.
The law regulating economic offences in Western Europe is very strict. If managers of a subsidiary in Ukraine bribe someone in Ukraine, managers of the parent company in Germany can be prosecuted. Therefore managers of the parent company have a essentialconsiderable interest in having no such actions to be taking place in their Ukrainian subsidiary that may be considered as white-collar crime in Western Europe.

Typical conditions when Compliance checks are required:

• there’s been no official/internal audit of the local company conducted for a long period of time
• there’s no budgeting implemented at the local company
• there’s no appropriateproper control over the bank account (bank signature is delegated to the local management)
• there’s no management reporting implemented at the local company or it is not automated

Our solution:

First we discuss the occasion for the compliance check with the client. Based Founded on initial discussion an action plan containing supervisory measures tailored to the specific case is created.
Since a compliance check is usually a delicate and sensitive matter, discretion is of utmost the greatest importance. ThereforeThat`s why, we only interfere as much as necessary to prevent any disturbance of the ongoing business.

One of the first steps to be taken is to obtain a copy of the accounting database a somefew days before the planned visit to the client’s office. This procedure enables us to carry out a thorough analysis of the received accounting data.
During the subsequent following visit to the client’s office, we do random checks of accounting and legal documents to verify the accuracy of the accounting database. Furthermore In addition we compare this information with other data sources like publicly available market prices and coefficient of benchmark companies wehich are known or information received from the mother company.

Our analysis focuses on the plausibility and transparency of transactions between the company on one side and the main contact points to its environment on the other side.
Based on this analysis we prepare a comprehensive detailed written report about the forensic results. The wording is chosenlanguage is simple in order that it can be understood even ordinary by people who are not financial specialists can understand it. The report includescontains:

1. comprehensivedetailed description of the analysis performed (including working tables as attachments)
2. definition of all non-compliance issues discoverfounded during the check
3. recommendations on how to proceed and to fix these discovered issues

Overall, we may summarize that as a result of Compliance Check the client receives:

• reduced possibilities for abuses and kick-backs
• reduced legal and tax risks
• an increased company’s economic value
• a more transparent, effective and profitable local business