As financial conditions deteriorate, this is becoming an ever more common problem. Financial records are stored on computers, and it is also where they are “doctored”. Grant Thornton’s accounting and computer forensics specialists can identify when and where the changes have been made.
The problem
One of our audit teams approached us with a problem. In carrying out their first audit of a newly purchased subsidiary they had found a peculiar anomaly. The Excel file provided by the client containing the valuation of the various stock items held by the subsidiary didn’t add up correctly. A stocktaking showed that the quantities were correct, and a check of the item valuations showed nothing wrong, but Excel simply had not calculated the total value of the stock correctly. What was going on?
The solution
Analysis of the Excel file quickly found a cell, hidden from normal users, adding over €200,000 to the value of the stock in hand. Because there were hundreds of different items in the stock list it was difficult to spot the location of the hidden cell. Further analysis of the Excel file, and analysis of the deleted files on the financial computer systems provided strong evidence that the hidden cell had been added by one of the company’s management accountants immediately prior to the takeover. The accounting firm that had performed the due diligence on the takeover had missed the rogue cell during their analysis. The extra cell had been added to inflate the stated operational profit of the firm, thereby increasing it’s value in the takeover.
Our client sued the subsidiary’s previous owners, and obtained substantial compensation.