Jersey: Moore Stephens Risk and Recovery Limited
Last Updated: 23 March 2011

Adrian Rabet a UK Licenced Insolvency Practitioner and Chartered Accountant with 30 years experience has been appointed director of Moore Stephens Risk and Recovery Limited, a new division of Moore Stephens Offshore, set up to deal with Corporate Recovery, Forensic Accounting and other risk based consultancy services.

Adrian gives his views of the growth of Insolvency and Forensic Accountancy Services in the Channel Islands with reference to the current economy and tightening financial regulation.

The present economic downturn has affected many companies and the difficult business environment has led to more work for Insolvency Practitioners and forensic accountants. Even accountants, however, have not been immune as the traditional areas of accountancy such as audit and tax have seen fee income fall as clients seek for better value leading to smaller practices struggling and indeed even the Big 4 have made staff redundant in the UK.

There have been some high profile complex insolvencies recently and practitioners have been involved in forensic work to unravel these in order to recover assets for the benefit of creditors. This work involves both insolvency teams and teams of forensic accountants appointed, for independence reasons, to identify areas of concern. In some cases litigation has attempted to recover assets for creditors and investors.

Normally practitioners would be less busy when growth occurs, however, with banks loath to collapse companies to crystallise bad debts, given their own weakened balance sheets, insolvency procedures will only commence once they strengthen, generating investigative work on their back.

CFOs under pressure to satisfy shareholder concerns have increased investigations to check accounts for discrepancies during the downturn. By examining their cost base and financial ratios carefully, they have identified weaknesses and tightened controls to increase shareholder value and profitability.

Forensic accountancy is perceived as countercyclical thus becoming less busy with growth, but growth will present myriad opportunities for fraudsters, as many frauds arise when profits increase when costs are examined in less detail and best value need not be obtained. Amounts of undetected fraud will increase until margins and profits decrease and attention is paid to cost minimisation.

Information technology has reaped great benefits, but has led to more sophisticated fraudsters and an increase in document fraud. This new technology fraud on both companies and individuals will require forensics to detect.

Moore Stephens undertakes insolvency appointments across the Channel Islands and carries out forensic and investigative work. With 115 Jersey and 35 Guernsey staff it draws on a wide range of skills from Trust and Company Administration, Fund Management and Accounting, Audit, Small Business Accounting and Tax. Moore Stephens uses staff to target solutions to a problem at a lower cost than if generalists are used.

New legislation and codes of practice have led to tighter financial services regulation in the Channel Islands over the past few years. Most companies have excellent new business Anti Money Laundering controls, but where they fail is transactional due diligence. The view is often taken that after initial verification, anything goes, whereas the codes stipulate understanding each transaction before it is undertaken. Failure to do so can lead to prosecution not just for systemic failure (Re: Michel) but for one-off failures as in the case of Caversham and Bell.

Moore Stephens supplies professionals to carry out reviews of client systems to look for weaknesses and to suggest improvements where needed.

Another regulator concern is the late production of trust and company accounts and Moore Stephens has a department led by partner Brona Lambert to assist in those areas.

Directors often ignore how to deal with companies at the end of their lives. Traditionally practitioners in the Channel Islands favoured the withering on the vine approach. This is not best practice as errors can lead to personal liability falling on the directors of a company. It is a practice which, the regulators currently frown upon in Jersey but is in effect finished in Guernsey because of possible sanctions on directors.

To avoid the possibility of directors’ liability in the case of error/misstatement one should always, where feasible, utilise a third party liquidator. An employee liquidator may be accused of collusion if errors are found, potentially this could be catastrophic for the business even if the accusations were proved ill founded, as the reputational damage may endure.

Moore Stephens takes that risk away from the directors and business by providing professionally qualified persons to act as independent liquidators.

For further information on all of our services please contact:

Adrian Rabet
Moore Stephens, First Island House,
Peter Street,
St. Helier
Jersey, JE4 8SG,
Tel: 01534 880088,

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