Forensic accounting adds more value in harness with expert services
26th March 2019
Coupling forensic accounting to specialist expertise in quantum, engineering and delay analysis can provide extra clarity and value for clients, especially in complex engineering and construction disputes.
So says HKA’s new Partner, Jonathan Humphrey: “Having these four specialisms under one roof means the different experts can co-operate seamlessly as one team, bringing extra insight to the quantification of commercial damages, with more efficiency, so no time or cost is wasted in producing value for the client.”
Jonathan is leading the company’s service offering in forensic accounting and commercial damages across Europe, the Middle East, Asia, Africa and Oceania. The brief is to extend his team’s know-how in accounting and finance to the group’s existing clients – and also, introduce HKA’s services to new markets and sectors.
Those forensic accounting skills are eminently transferable. In 20 years advising on complex contentious matters around the globe, Jonathan has dealt with a spectrum of sectors – from pharmaceuticals and high-street retail to motion pictures and oil and mining.
Meanwhile, his forensic investigative work has taken in Oil-For-Food trading with Iraq and the world’s largest-ever Ponzi scandal, involving Bernard Madoff.
“We can provide services to every industry. For me, the assessment of damages isn’t constrained by sector, numbers are numbers,” he said.
Construction track record
Jonathan’s track record in construction disputes is similarly wide-ranging. From calculating loss of profits, overhead apportionments or lost investment opportunities to valuing businesses, he has provided expert advice to contractors, investors and government on developments ranging from residential and commercial developments and highways to power plants and privately financed transportation upgrades.
These and other commissions have involved multiple arbitration forums, court litigation and mediation in various jurisdictions.
In a career working for major consultancies in Europe and Australia, Jonathan has operated both independently and in conjunction with counterparts, from other firms, specialising in delay and disruption, quantum and forensic technical analysis.
Integrating these disciplines fully to provide a more joined-up approach to complex disputes offers potentially significant advantages, Jonathan believes. “On engagements where there are disruption, delay and engineering issues, the understanding of who’s responsible and why is invaluable information for the damages expert.”
This may seem straightforward in the case of a revenue-generating asset, such as a hotel, where profits are lost due to delayed completion. The forensic accountant establishes the actual position and then builds up a counter-factual scenario – as if the asset was delivered on time. This may be based on economic indicators and competitors’ performance, as well as the client’s own projections, in this case, for room occupancy and revenue.
However, depending on the nature of the project and its complexity, the value added by combining accounting and technical know-how can be considerable. “In a coalmine dispute, for example, my expertise in calculating financial damages can be enhanced if our team includes an engineering expert with direct experience of coalmining operations. He/she understands the difficulties in extraction, quality of output, getting that coal to market, and the cost structures and regulations that apply,” he explained.
Credibility and insight
“Feeding that industry knowledge into complex damages calculation can add credibility and insight that tribunals and courts can fine very useful.”
HKA enjoyed a competitive advantage in this regard, he said: “The defining capability of HKA is that it can assemble a team with that kind of know-how and hands-on experience to match the exact requirements of the project and client.”
And he added: “For the forensic accountant, turning to that colleague at the next desk for instant advice is also far more efficient than having to consult files, research issues or liaise with third parties.”
HKA already offers a forensic accounting service to the Americas, out of Philadelphia. Based in Sydney, Jonathan will be dividing his time between Australia, Europe, the Middle East and Asia as HKA extends its full suite of complementary services worldwide.
Just over a month into the new role, Jonathan is building up teams in London, Dubai and Sydney, and has Associate Director Hamish Egan in place in Singapore.
“The collaboration within HKA has really impressed me,” he added. “Our people are identifying opportunities for us forensic accountants to assist on active matters, adding to the value we offer existing clients, and also seeing opportunities to attract new clients. They are already alive to our new service, invested in it and see forensic accounting as a growth area for the firm.”
Most activity, at least initially, will focus on claims for economic damages, including loss-of-profit calculations arising from breach of contract and warranties, valuations resulting from expropriation and shareholder disputes, and quantification of damages in respect of class actions, professional negligence, insurance claims, business interruption and post-acquisition disputes.
As the world’s leading expert witness practice in engineering and construction, “HKA has a great brand name and commands the respect of a large client base, not least lawyers,” Jonathan observes. “It’s great to get out there and be able to offer a new service line.”
On engagements where there are disruption, delay and engineering issues, the understanding of who’s responsible and why is invaluable information for the damages expert.
Jonathan Humphrey, Partner
