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Director Ban Increase Could Lead To Forensic Accountancy Need

Member: Nifa

With an increase in directors in England, Wales and Scotland being disqualified by the Insolvency Service this year, there may be more need for forensic accountants to investigate alleged fraudulent or wrongful trading.  Figures from the Government body show that the number of directors being disqualified has increased by 25 per cent since last year, with 1,208 disqualified directors during 2013/14, up from 969 the year before. 

The last year also saw a 19 per cent increase in the number of director disqualification proceedings issued by the Insolvency Service, the first rise in such action since 2010.  The increase in disqualifications may be a sign that the Insolvency Service is taking a more robust attitude to ‘rogue’ directors and comes as Business Secretary Vince Cable has called for tougher action to clamp down on what he has called ‘dodgy directors’.

Forensic accountants are often called in on questionable insolvencies to investigate whether directors have acted in accordance with their fiduciary duties and behaved responsibly to creditors.  

This is because behaving irresponsibly or even criminally is a very serious offence and can lead to bans of up to 15 years on being a director of a company, acting as a receiver of a company’s property or being concerned in or taking part in the promotion, formation or management of a firm.  In such cases, the forensic accountants will examine the books, various forms of documentation and bank accounts to confirm whether or not directors have acted correctly and are often called upon to present their findings in court as expert witnesses, should the matter come to that.

Author: Roger Isaacs, 14 July 2014

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