Forensic Accounting

Service cost: by appointment

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  • +38 (044) 492 77 XX
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Our definition: Forensic Accounting /Compliance check

We help management of western parent corporations to understand if:
• the local management acts in compliance with internal corporate policies, guidelines and legal requirements
• all business operations of its affiliated company in Ukraine are conducted transparently
• the internal audit system of the company is effective
• the company's reported financial results are adequate
• there are no abuses/kick-backs/bribes possible

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

• high level of cooperation with private entrepreneurs especially regarding received marketing or other services
negative financial result reported by local management for several years (despite lacking objective (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 overrun or unavailable budget)
• ongoing communication by local management for the need of unofficial cash transactions
any customers/suppliers related to the local management
high level of outstanding debts of any local customers
discrepancies of bank account balance being reported and according to the bank statements
discrepancies between the stock being reported and the actual inventory
discrepancies between the number of employees being reported and actual number of employees
bonuses and additional benefits granted to the employees beyond the labor contracts
discrepancies 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 according 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 considerable interest in having no actions to be taking place in their Ukrainian subsidiary that may be considered 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 proper 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 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 importance. Therefore, 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 some days before the planned visit to the client's office. This enables us to carry out a thorough analysis of the received accounting data.

During the subsequent visit to the client's office, we do random checks of accounting and legal documents to verify the accuracy of the accounting database. Furthermore we compare this information with other data sources like publicly available market prices and coefficient of benchmark companies we know 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 detailed written report about the forensic results. The wording is chosen in order that it can be understood even by people who are not financial specialists. The report includes:
1. detailed description of the analysis performed (including working tables as attachments)
2. definition of all non-compliance issues discovered 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

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Otten Consulting: accounting services, tax advice, forensic accounting
(main office)

04053, Ukraine, Kyiv, , Bekhterevskyi lane, 4B
  • +38 (044) 492 77 XX
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