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Exploring expert witness predictions for 2023

What trends will we see in forensic accounting this year?

In light of events that have unfolded over the last two years, from the COVID-19 pandemic to the war in Ukraine, it is difficult to try to predict what will happen in 2023. However, as expert witnesses, our work follows from recent events, making it possible to anticipate what trends will develop in the coming months.

Fraud and false accounting

Unfortunately, all signs point towards there being a surge in cases of fraud and false accounting throughout the year. Forensic accountants often abide by of the concept of the fraud triangle, which dictates that there are three components that together lead to fraudulent behaviour. These are motive/pressure to commit fraud, opportunity to commit the act and rationalisation of the action.

In times of financial pressure, there inevitably arises an increased likelihood of fraud, whether it be to obtain funds for personal needs or to misrepresent a business’ financial position in order to keep operations running. In times of inflation this applies to individuals as well as businesses, meaning that we can expect to see an increased willingness amongst individuals to resort to fraudulent and illegal practices to subsidise their income.

At the same time, those managing a business or charity may be under-resourced, and thus less likely to spot the warnings signs of such activity taking place before they become an issue. With this in mind, we would advise business owners to remain vigilant of a surge in fraudulent practice throughout the coming months.

Commercial disputes

Commercial disputes, namely those arising from breach or termination of contract, typically increase in a volatile economy.

In recent times businesses have faced huge inflationary pressures, driven by supply chain issues and labour shortages. Consequently, they may seek to escape what has become an unprofitable arrangement, or conversely may be unable to fulfil their contractual commitments.

As a result, we are expecting an increase in instructions to assess the commercial losses that may arise from contractual breaches.

Disputes arising post company sales

Disputes arising out of SPAs (sales and purchase agreements), including warranty claims, are already hitting our desks, and I would expect see this to continue in 2023.

Both 2021 and 2022 were buoyant times for business sales, as firms in all sectors looked to consolidate operations to combat uncertainty. Many of these deals will have reflected the positive trading results being achieved at the time, and will include deferred or contingent consideration.

However, recent economic considerations may mean that trading performance of many firms since such deals may have deteriorated. In such situations, the buyer may look to recover part of the consideration paid or to avoid paying deferred consideration, in which situation an expert witness will be called in to advise.

Matrimonial, family and shareholder disputes

In times of financial pressure, we typically see an increase in family disputes arise. These cases include divorces, probate disputes, partnership disputes and claims of unfair prejudice.

Forensic accountants can be instructed to value family businesses to assist both lawyers and the court in attempting to secure an equitable distribution of assets

Professional negligence

Forensic accountants can also be instructed to consider whether the conduct of an accountant or tax adviser met the standard of a ‘reasonably competent’ professional. This involves considering the value of financial loss in claims against professionals in a range of sectors including medical, legal, financial services and construction.

Over the last decade clients have been more willing to pursue claims against those who were once their ‘trusted advisers’, and we can expect this trend to continue throughout 2023.

Insurance claims

With many firms incurring substantial losses during the pandemic, there has been an increase in instructions to help deal with insurance claims. The current difficult operating environment means that we can expect this to continue.

In the first instance, legal counsel will need to determine if the loss is covered by any insurance. If so, forensic accountants may be instructed to give an expert view on the value of any loss allowing for any reasonable mitigation.

Court delays

One of the most pertinent trends of the past two years has been the delays in instructions and hearings caused by court backlogs following the pandemic. This has had a negative impact on clients, lawyers and experts alike, as a system already struggling to cope with a surge in activity post-COVID was further impacted by hiatuses arising from the sanctions on Russia.

Unfortunately, we expect these court delays and sanctions to continue and inevitably clients and experts will have to continue to manage cases while navigating extended periods of inactivity and inevitable inefficiencies.

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Fiona Hotston Moore

Fiona Hotston Moore

  • Partner
  • Forensic Services
  • Cambridge