THE CHALLENGE
In 2004, an employee of the Japanese subsidiary informed corporate headquarter of concerns regarding certain transactions conducted by a small number of the subsidiary’s leadership. As the subsidiary’s activities were material to the company’s global results, the issue became public knowledge, and the parent company was forced to issue a press release. Unable to meet its SEC filing deadlines due to the alleged fraud and potential inaccuracies in its financial statements, the client faced a real threat of being delisted from NASDAQ. The company needed to:
- Investigate the allegations and find proof of their veracity.
- Initiate legal action, if appropriate, and quickly address any systemic defects.
- Tackle critical staffing issues to ensure business continuity during and after the investigation.
OUR APPROACH
With a mandate to quickly gather information while the business continued to run, Ascendant deployed a local team to investigate five years of financial transactions and provide interim support for business operations.
- Deliverable: Forensic Accounting and Data Gathering
Ascendant delivered a team of four forensic accountants and two project administrators for a full six-month engagement. To swiftly address the concerns raised by stakeholders and the local entity, an extensive investigation was conducted into all dubious transactions, both fund sources and destinations, to verify grounds for allegations of embezzlement based on past fictitious reports and invoices (e.g. entertainment expenses). - Value:
Work done by the Ascendant team led to the uncovering of supporting evidence which led to the prosecution of the offenders involved, and preventing the possible delisting of the parent company.
- Deliverable: Financial Reporting and Compliance
Work completed by the Ascendant team resulted in the restatement of financial statements for the periods affected. At the same time, Ascendant identified the internal controls that would be needed to prevent a recurrence of the problems involved, and delivered an upgraded set of controls that would also provide for SOX compliance. - Value:
While the initial focus was on a forensic search for evidence, the Ascendant team delivered added value in the form of improved controls that would enable the client to continue its business while gaining greater confidence in the quality of the financial reports generated by its Japanese subsidiary.
- Deliverable: Interim Management and Business Continuity
An interim Representative Director and an interim Chief Financial Officer, both from Ascendant, were put in place, while the former CEO of the subsidiary, along with several officers, were placed on administrative leave. To raise the awareness of all stakeholders, Ascendant established communication protocols that would ensure regular reporting and the transparency of all measures taken. - Value:
Again, interim staffing and other services provided by Ascendant were critical in providing continuity of business throughout the course of this delicate investigation, and in leaving the client with a much-improved operation within its subsidiary in Japan.
