My expert predictions for 2023 – the ‘Year of the Water Rabbit’

[2023 IS THE YEAR of the Water Rabbit. According to the Chinese horoscope, those born in the Year of the Rabbit are vigilant, witty, quick-minded and ingenious. Vigilance, quick-thinking and dexterity are all important skills for an expert witness; thus the Rabbits amongst us should be well equipped in what looks like being another volatile year.

In light of events which have unfolded over the last two years, it is perhaps foolish to try and predict what will unfold in 2023. However, as expert witnesses, our work follows from recent events and I will endeavour to give my predictions on which type of cases we will be providing expert opinion on in 2023.

A forensic accountant will typically talk about the fraud triangle. This is the concept that there are three components which together lead to fraudulent behaviour. These are motive/pressure to commit fraud, opportunity to commit the act and rationalisation of the action.

Unfortunately, in times of financial pressure for individuals and businesses, there is inevitably an increased pressure to commit fraud, either to obtain funds for personal needs or to misrepresent the business’ financial position. At the same time, those managing the business or charity may be underresourced and less likely to spot the warnings signs. Therefore I expect to see a raft of such claims throughout 2023 and beyond.

Commercial disputes, including those arising from breach or termination of contract, typically increase in a volatile economy. In recent times businesses have faced huge inflationary pressures, supply chain issues and labour shortages. Businesses may seek to escape what has become an unprofitable arrangement or be unable to fulfil their commitments. As experts, we will be instructed to assess the commercial losses arising from contractual breaches.

Both 2021 and 2022 have been buoyant times for business sales and many of these deals will have reflected recent positive trading results. The deals may include deferred or contingent consideration. The trading performance since the deal may have deteriorated and in such situations the buyer may look to recover part of the consideration paid or to avoid paying deferred consideration.

Disputes arising out of SPAs (sales and purchase agreements), including warranty claims, are already hitting our desks and I would expect these to continue in 2023.

In times of financial pressure, we typically see an increase in family disputes and disputes between shareholders. These cases include divorces, probate disputes, partnership disputes and claims of unfair prejudice. As forensic accountants we will be instructed to value family businesses in order to assist the lawyers and courts attempting an equitable distribution of assets. In 2023 we may also be instructed to revisit our earlier opinions on business valuations in light of a deterioration in financial results and the economic outlook.

In cases where a business has ceased trading and creditors may not be paid in full, we are often instructed to undertake an investigation into the conduct of the directors and to identify matters such as sales at under value, defrauding creditors and misfeasance. We will assist the insolvency practitioner in taking any appropriate action to recover assets.

As forensic accountants, we are instructed to consider whether the conduct of an accountant or tax adviser met the standard of a ‘reasonably competent’ professional. We are also instructed to consider the quantum of financial loss in claims against professionals in a range of sectors including medical, legal, financial services and construction.

Over the last decade clients have been more willing to pursue claims against those who were once their ‘trusted advisers’ and I expect this trend to continue.

As forensic accountants we are already dealing with insurance claims arising from losses incurred during the pandemic. In the first instance legal counsel will need to determine if the loss is covered by any insurance and if so, we may be instructed to give an expert view on the quantum of any loss allowing for any reasonable mitigation.

More generally we have experienced delays in instructions and hearings due to court backlogs. There have also been hiatuses arising from the sanctions on Russia. Unfortunately, I expect court delays and sanctions will continue and inevitably clients, lawyers and experts will have to manage cases with extended periods of inactivity and inevitable inefficiencies.

To conclude, experts will need to continue demonstrating vigilance, flexibility and dexterity in what looks likely to be another volatile year. q