Forensic accountancy is often cast as the exciting end of the profession, conjuring up images of accountants pitting their wits against criminal rings or returning Nazi-appropriated gold to its rightful owners.

Jonathan Russell, senior partner of Oxfordshire firm ReesRussell, and president of the UK200 Group, doesn’t often find himself head-to-head with criminal masterminds, however.

‘There are plenty of images of exciting forensic work,’ he says. ‘Yes, there are cases that might hit the headlines associated with criminal cases and drugs and money laundering, or the big fraud cases. But these are just the headline grabbers and do not really reflect the normal run-of-the-mill work for the forensic or expert accountant.’

With 20 years as a forensic accountant and expert witness, Russell says his work is more closely aligned to the work of the accountant in general practice than people perhaps might think -­ contractual disputes, insurance cases and matrimonial break-ups, anything where an expert valuation might be needed.

That is not to say that his work is not interesting, however. There’s a great deal of intellectual satisfaction involved. It may not quite live up to the Boys Own fantasy, but it is there none the less.

Russell recalls a case he worked on a few years ago. A lawyer acting for the estranged wife of a technology entrepreneur asked him to look at the business with a view to working out a valuation as part of a potential settlement. The wife had not been involved in the business for several years and the business, previously successful, had seen a sharp decline in sales.

The children from the marriage were all adults and employed in the husband’s business. ‘My instructions were to place a value on the company, to look at its future performance potential and to estimate what earnings could reasonably be taken from the business. I was also asked to consider if business was being diverted from the company elsewhere. It was thought that the husband and children might be diverting business to reduce any payment to the wife and mother.’

Explained away

Russell discussed the drop in business performance with the company directors in detail. They accounted for it by explaining that their main product had come to the end of its commercial life, but the company had not managed to secure contracts for its new product.

Russell looked closely at telephone costs to try and establish what was happening with sales. The cost of telephone calls had remained fairly static and an analysis showed that calls were still being made to the company’s major customers.

Reasonably enough, the company was still trying to persuade existing customers to buy its new product. ‘We called people at the customer company, but could not find out anything concrete,’ says Russell, ‘but there was still a gut feeling that something was not right. We queried the level of phone calls with the directors who said quite reasonably they were in close contact with the previous customers because they were desperate to convince them to buy the new generation product ­ a very plausible explanation.’

Having not been able to find anything outright, Russell was about to submit an initial report that he feared would not help one way or the other. ‘You don’t really imagine accountants having sleepless nights over such things, but we do. And on this occasion, it was the stroke of luck that was needed.’

A wakeful Russell turned on the television early and began watching some motor racing. ‘I noticed two of the cars were carrying substantial advertising logos for the company I had been looking into. I could not recall having seen such expenditure in the accounts I had looked at. Sponsorship was one of the expenses they had reduced.’

Tracing back from the racing team, Russell found a new company controlled by the children into which sales for the new product were being transferred. A lot of dogged investigations, followed by a stroke of luck, had paid off.

Russell trained in audit and still provides general business advice to a range of owner-manager and SMEs. Since his days as a trainee, he has been interested in the inner workings of companies and it is that knowledge that informs his investigative work.

This time it’s personal

Russell’s first involvement in forensic work came almost 24 years ago, shortly after his move to Oxford. As part of general practice work, he got involved in a personal injury claim. ‘That started me on the path to expert witness work.’

He has spent most of his working life in Oxfordshire and now runs a small firm in Witney. Until recently, he was part of Critchleys, a Top 50 firm, which he joined six months after qualification. When Critchleys decided to close its Witney office, however, Russell and fellow partner Theresa Rees decided to set up for themselves. The closure did not make commercial sense to them and on 1 March 2006, ReesRussell was born ­ demerged out of Critchleys with two partners and ten staff.

ReesRussell works predominantly with owner-managed businesses. ‘We are very much service-led. We try to involve staff in all decisions, so they are bound in to the service culture.’

He also has access to a network of experts through the UK200 Group’s forensic accountancy committee. ‘That’s a huge resource to be able to call upon,’ he says. ‘There are some very good specialists at the other firms.’

Fraud may, to an extent, be a fact of business life, but few companies want to become a cautionary tale. Many fear that from the point of view of their customers and suppliers, a fraud case will smack of inefficiency. ‘It is striking how many times you come across a fraud where the company does not even go on to dismiss the person involved,’ he says. And some owner-managers will even go some way to sharing the blame if they feel they have put temptation in the way of vulnerable employees.

Russell cites one case where an employee got into the habit of booking cash sales as hire-purchase agreements. It turned out that he was using the money to fund medical expenses for his wife. Since he was repaying money in line with the hire purchase schedule and the company was not losing out, the directors felt an employee loan would be the best solution.

Like this one, some cases involve a co-operative perpetrator. Others prompt a convoluted trawl through documents, computer hard drives, emails and interviews to establish what and even whether anything has been taken. Forensic work increasingly depends on IT expertise and Russell frequently calls on the skills of Vogon, a nearby office of the international forensics group.

Around 95% of his instructions come from solicitors. While the motivations and crimes differ, the skills, says Russell, are fairly transferable from one case to another, and mediation is growing in importance. ‘People realise just how expensive and long-winded court proceedings can be,’ he says. Russell is an accredited mediator and the only accountant board director of alternative dispute resolution organisation ADR Group. His skills are also in demand around partnership disputes at law firms. Lawyers appreciate the financial expertise ­ and the fact that he isn’t another lawyer means they can avoid a conflict of interest.

His practice ­a blend of business advisory and forensic work ­is a good mix. ‘Forensic work gives some excitement to the day-to-day,’ he says. 

CLIENT VIEW: Russell employs his forensic skills in high court personal injury claim

Fraud cases may have the potential to capture the imagination and prompt plenty of headlines, but a great deal of forensic work revolves around contractual disputes, commercial disagreements, insurance cases and matrimonial break-ups. That’s where Russell’s dual talents in investigative work, plus his experience in litigation support work, come in handy.

Richard Davies, a solicitor in a Cotswolds-based, four-partner law practice Kendall & Davies, has known Russell in a professional capacity since Russell helped provide a valuation in a personal injury claim seven years ago. Davies was putting together a compensation claim after a young man died in a motor accident and his girlfriend, pregnant at the time, wanted to sue the other driver on his behalf. The other driver had a large insurance company behind him.

‘There were some compensation calculations as to what he would have earned, his loss of earnings and loss of expectation of life. Jonathan helped to substantiate our claim.’

The case had been destined for a High Court hearing, so Davies needed Russell’s expert witness skills and a valuation report. He recalls that the other side put together a long-winded and convoluted report in response. But Davies had greater confidence in Russell’s more succinct approach. And while the case eventually settled without coming to a full trial, Davies also had the reassurance of knowing that Russell was experienced in the witness box and understood court procedures.

Kendall & Davies has also used Russell’s financial expertise in more run-of-the-mill commercial cases, such as valuing the half-share of a business when another Kendall & Davies client wished to exit the company he had helped build up.

‘On the face of it, business accounts for private businesses don’t give the full picture,’ he says. ‘Having someone who is approachable, who is good at giving a clarification and who can provide a comprehensive picture is all important,’ he says.

Davies also rates Russell for his willingness to get stuck into the messy particulars of a claim. ‘You need someone who is a battler, someone who will help you in a fight,’ he says.

Forensic tool kit

• Lateral thinking – you have to be able to think: ‘if I wanted to do something, how would I do it?’ You have to look at a transaction in a slightly different way.

• Keep up to date – you need to know how businesses work and how business is changing. You can’t be an expert witness if you’re not doing up-to-date work.

• Good reputation – there’s no substitute for doing a good job. Forensic work is no different to any other service and the bulk of the work comes through recommendation.

Check out the company's website at  www.reesrussell.co.uk