Audit negligence and financial reporting dispute
Specialist advice for those facing the serious financial and reputational consequences of audit negligence and/or financial reporting disputes
If there are misstatements in audited accounts as a result of auditor negligence, the specialist Forensic Services team at Evelyn Partners can help. We have an in-depth understanding of the onerous requirements of auditing standards and extensive experience of assessing the extent to which auditor negligence contributes to misstatements in audited accounts.
Working closely with your legal team, we will work constructively to find appropriate answers to the extent of negligence and how that negligence gave rise to the underlying losses.
Our team has also worked on numerous cases where financial reporting matters were at the heart of the dispute, covering international financial reporting standards and FRS 102.
Our aim throughout is to ensure that our input and reports are balanced and understandable to non-accountants.
Expert witness experience
- We act as expert witness in relation to audit negligence and financial reporting dispute claims and regulatory breaches
- Our team provides audit and financial reporting expertise, supporting a wide range of different disputes between businesses, including between businesses and their former auditors
- We have a strong experience as expert witness acting for both Claimants and Defendants. This includes both criminal and civil procedures, as well as supporting regulators in their examination of audit work as part of regulatory investigations and advising accountancy firms under investigation
Our approach is to ensure that we have close personal involvement with each assignment. This helps to ensure that our expert witness has a high level of personal knowledge of the issues relating to the specific assignment and therefore enables us to provide first-hand insights. Our expert witness has personal experience of appearing in the witness box, as well as of attending and contributing to mediations.
Audit negligence assignments
Our forensic accountants and audit experts can support you when you are subject to regulatory or disciplinary action (FRC, ICAEW, and others), or civil claims (from an audit client).
- Acting as experts in a claim involving a large audit firm, which was auditor to a group where the financial statements were alleged to have been materially and fraudulently misstated for many years. Our expert witness could help you if you fall victim to “cross firing”, which is the practice of falsely recording additional assets arising out of payments and receipts involving connected parties
- Acting as an expert in a claim involving a large audit firm, where an airline group was alleged to have published misstated financial statements in various countries
- Acting as an expert in a claim against an audit firm involving a financial services company where the financial statements were misrepresented due to fraudulently portraying assets as being owned by the company whereas in fact they were not
- Acting as an expert for the defence in connection with a claim against a firm of auditors in which it was alleged that the financial statements misrepresented the assets of the company
- Acting as an expert for the claimant in connection with a claim against a small firm of auditors where it was alleged that the capitalisation and income recognition policies were inappropriate for the business, leading to Board decisions that were damaging to the long-term future of the company
- Acting as an expert in relation to a large Irish bank where it was alleged that the auditor failed to identify significant unauthorised related-party transactions, which (had they been appropriately reflected in the financial statements) would have led to intervention by the Board and avoided losses
Financial reporting dispute
Our team can assist you in determining whether a misstatement has arisen in your financial statements, and if they meet the requirements of the financial reporting standards you apply (IFRS, UK GAAP, other). We can also assist in determining what correction, if any, is needed.
- Acting as expert in the defence of a finance director of a group operating in the financial services sector where it is alleged financial statements were misstated
- Acting as an expert in a claim involving financial statements for a multinational group which failed to disclose material related to party transactions which were not at arm’s length
- Acting as an expert in a claim relating to misrepresented financial statements which were drawn up using a going concern assumption when that assumption was not valid
- Acting as an expert in a case involving a national corporate that applied hedge accounting in circumstances where it was not eligible to do so
- Acting as an expert in a case where material liabilities were omitted from the financial statements
- Acting as an expert in a criminal prosecution in which it was alleged that the managing director of a large retail outfit deliberately misrepresented the financial statements
- Acting as an expert in a claim against a subsidiary finance team which it is alleged misled the parent as to the true state of affairs within the business
- Acting as an expert in a dispute with HMRC over the extent to which tax relief was claimed for investments in a collection of films
- Acting as an expert in a dispute with HMRC over the tax deductibility of certain expenses, including amortisation of goodwill
Our experienced team is here to help you with audit negligence and financial reporting disputes. Please get in touch today.
Frequently asked questions about audit negligence and financial reporting
What do I do if I suspect my auditor has been negligent?
We recommend engaging an audit expert as soon as you start considering making a professional negligence claim. We work with lawyers to:
- Evaluate the strength of any potential auditor negligence claim.
- Identify specific areas of potential negligence, with reference to auditing, accounting, and ethical standards, to inform the drafting of claims.
- Identify what relevant evidence the auditor may hold, to inform requests for information.
- Provide expert opinion on whether auditor negligence occurred, and what a competent auditor would have found.
- Determine the extent to which the audited financial services were misstated.
What do I do if my audit firm has been accused of auditor negligence?
Our forensic accountants and audit experts can support you when you are subject to regulatory or disciplinary action (FRC, ICAEW, and others), or civil claims (from an audit client). We can support your legal team in:
- Performing an initial, independent assessment of the strengths and weaknesses of the claim.
- Reviewing the specifics of the claim against you and using our expertise in auditing standards (ISAs) and current practice to inform the defence.
- Scoping requests for information.
- Determining whether any actual misstatement of the financial statements arose out of the claimed negligence.
When would I need an accounting expert?
There are many instances in which our expertise can help you, including:
- Determining whether a misstatement has arisen in your financial statements, and if they meet the requirements of the financial reporting standards you apply (IFRS, UK GAAP, other). We can also assist in determining what correction, if any, is needed.
- Assisting in warranty claims, for example by establishing the accuracy of completion accounts.
- Providing an accountant’s interpretation of terms used in contracts, where their meaning is disputed.
- Performing impact assessment of new or existing accounting standards IFRS and UK GAAP to ensure readiness Link https://www.evelyn.com/services/assurance-and-accounting/accounting-advisory/
What happens if I need to go to court?
- We act as expert witness in relation to audit and financial reporting negligence claims and regulatory breaches.
- We provide audit and financial reporting expertise supporting a wide range of different disputes between businesses, including between businesses and their former auditors.
- We have strong experience as expert witness acting for both Claimants and Defendants both in criminal and civil procedures, as well as supporting regulators in their examination of audit work as part of regulatory investigations and advising accountancy firms under investigation.