MW Insights – September 2025
In September we can sometimes feel a shift in the air with slightly longer days, warmer weather and that sense of possibility (without the hayfever we hope!)
In our last newsletter sent in July, we provided an overview of the basis of valuation. We discussed what valuation is, how to achieve the best results working with a single expert witness and the form that expert witness reports must take. We also explored valuation from the perspective of Family Law matters. If you missed it, you can read our newsletter here.
In this newsletter, we examine the role of a forensic accountant in the investigation and quantification of commercial matters. We hope you find this newsletter useful. As always, please feel free to share it with colleagues if relevant.
More than an Expert Witness: The Work of a Forensic Accountant
While much of our work involves acting as an expert witness, whether by providing a professional opinion via a written report to be submitted as evidence or by presenting oral evidence in court, we can also support you and your client in the following capacities:
Consulting Expert: we can act as an advisor, arbitrator, mediator, member of a professional tribunal, expert in an expert determination or a referee.
Investigation: we can advise or assist with an investigation relating to allegations or concerns of conduct that may be illegal, unethical or otherwise improper (whether or not this is within the context of proceedings).
Lay Witness: we can provide evidence other than expert witness evidence on matters within our professional knowledge that are directly observed or perceived within the context of proceedings.
From Due Diligence to Disputes: How Forensic Accountants Assist Across Different Matters
As Forensic Accountants, we can assist with a broad range of commercial matters, the most common of which are outlined below.
Quantification of Damages
The quantification of damages may be relevant to negligence claims, statutory claims or contractual claims. Forensic accountants are generally only concerned with economic or pecuniary damages and not general damages (such as that relating to pain and suffering or loss of reputation).
Examples of the types of disputes that may require a quantification of damages include breach of contract, product liability, business interruption, franchise disputes, intellectual property infringements, professional or director negligence, compulsory acquisitions or relocation of business, misrepresentation and other commercial disputes.
Tip: It is important that instructions to forensic accountants clearly specify whether the claim for damages falls under Contract Law, Tort Law, or both.
Valuation of Business, Entities and Shares
The intended use of a valuation influences both the value determined and the methodologies applied. We conduct business valuations for purposes such as compliance, mergers and acquisitions and dispute resolution including shareholder disputes.
A business valuation refers to the value of the operations of a business, which is typically represented by the present value of the future cash flows (DCF) or the capitalised maintainable earnings (CME). This value incorporates / subsumes the value of the net operating assets, which are involved in the operation of the business being assessed, and could include debtors, stock, plant and equipment, goodwill, creditors, employee entitlements and other intangible assets such as patents, brands, customer lists, business names, creditors and employees.
Tip: The most common methodology for profitable small-to-medium enterprises (SMEs) is CME due to the simple nature of their operations and their reporting is less robust.
Successful businesses grow from strong value drivers. Value drivers typically reduce risks associated with owning a business and/or enhance the prospects that a business may grow. Examples of value drivers include stable and predictable cash flow, a solid and diversified client base, recurring revenue, reliable financial information, quality staff, good management team, good systems and procedures, strong market presence, strong brand name, products protected by patent and access to efficient and fit-for-purpose technology.
When selling a business, it is important to understand its true market value. Emphasising key value drivers can make the difference between underwhelming offers and a lucrative deal.
If your client needs assistance with assessing the value of their business or a proposed purchase, our team provides the expertise needed to help them negotiate effectively from a well-informed position.
Fraud Investigation and Prevention
Fraud usually occurs in three main forms: asset misappropriation, corruption, and fraudulent statements.
Specific examples of fraud include payment for work not performed, overcharging, unauthorised transactions, altering stock records, equipment/stolen supplies, cheques made out to false persons, collusion with customers or suppliers, theft of funds under management or held in trust, overclaiming employee expenses, false insurance claims and incorrect information in selling memorandums or business vendor statements.
To prevent fraud, companies should regularly assess their susceptibility to fraud. This includes considering the opportunities and motivations that employees, customers and suppliers have to access cash and stock from the organisation without paying for them. It would be prudent to include a control plan as part of the overall risk management strategy of the company.
A forensic review or investigation can be conducted to confirm or dispel suspicions of wrongdoing. The reports provided at the end of a review or investigation usually include a lengthy and well supported chronology of the investigation and findings. A forensic review differs from a statutory audit in that it is smaller in scope and focused on key areas of concern between the parties.
Tip: The most common and effective form of control and fraud risk mitigation is the segregation of duties. This involves key overlapping tasks being handled by different persons to help reduce the likelihood of fraud occurring. e.g. accounts payable and the authorisation of payments being handled by different people.
Business Interruption Claims
Some businesses take out insurance to cover instances where a business is interrupted by an unforeseen event, such as a fire or a flood.
When a business interruption claim is made under an insurance policy, the lost profit will be calculated by a Forensic Accountant based on the business’ historical financial records, and adjusted for trends. Our role in these matters include assisting in the identification and analysis of key financial records and undertaking detailed trend analysis.
Typically claims handled by insurance companies are undertaken by dedicated loss adjusting firms and are in compliance with the relevant insurance policy.
We are able to assist parties in such matters to verify the reasonableness of such claims / payouts, or otherwise prepare an economic loss assessment for tortious litigation claims and amounts not covered by business interruption insurance.
Tip: We were recently engaged in a tortious claim in the Supreme Court of New South Wales that settled on the first day of Trial. The defendant’s expert claimed there was no additional loss over the loss of gross profit covered by a business interruption claim, however our analysis confirmed the loss of net profit due to ongoing disruption was in excess of $1 million. We understand the parties settled with significant reliance on our report.
Compulsory Land Acquisition
Forensic accountants may provide strategic advice and specialist analysis to Small Business Enterprises facing compulsory land acquisition.
Given the complexities involved, valuations in these matters often require consideration beyond standard valuation methods, taking into account relevant micro and macro-economic factors. Our team can be contacted for a thorough and tailored approach to help your client if they are navigating compulsory land acquisition and associated business relocation.
In upcoming newsletters we will explore the main methods of valuation, and the factors commonly taken into account in the selection of the appropriate valuation method. Stay tuned!
Our New Office is now in Ringwood
A reminder that we have moved and you can find us at Suite 2, 12 Maroondah Highway, Ringwood 3134, Victoria. We’re the green/blue glass building next to the Eastlink turnoff.
Our Accredited Specialists
Victoria Wheeler – Director with over 20 years’ experience in accounting, business services and taxation. She is recognised as a Business Valuation Specialist by CA ANZ and has appeared as an Expert Witness in the Federal Circuit Court of Australia and County Court of Victoria.
Joshua Wheeler – Director with over 17 years’ experience in commercial and professional accounting services. He is recognised as a Business Valuation Specialist by CA ANZ, has appeared as an Expert Witness in the County Court of Victoria, and has participated in conferences / mediations with legal representatives and other experts.
He was a presenter at the inaugural SV Partners Accounting Forum, has presented with Legalwise Australia, and regularly presents to law firms on Business Valuations for Family Law matters
As always you can reach out at any time on (03) 9816 9122 or email us at advice@mwforensic.com.au.
Regards,
The MW Forensic Team
(Like the A-Team for litigation support)
Disclaimer: Although every care has been taken in preparing “MW Insights”, no responsibility is accepted by Munday Wilkinson Pty Ltd for errors or omissions. Professional advice should be sought before applying the information to particular circumstances.
Liability limited by a scheme approved under Professional Standards Legislation
Munday Wilkinson, trading as MW Forensic, is a boutique business valuation and forensic accounting firm established in June 2000. We offer the legal profession, and others, a quality, personalised, time efficient and cost-effective service