Forensic Finance – What is it?

In today’s judicial system, the difference between winning or losing litigation rarely lies in the interpretation of the law, but rather in the strength of the technical evidence. In proceedings where numbers take centre stage, Forensic Financeacts as the critical bridge between financial-accounting language and legal rigor, transforming complex data into arguments capable of determining a judge’s decision.

Forensic Finance, or Forensic Accounting and Financial Analysis, is a specialised field within finance that focuses on investigating financial fraud, accounting irregularities and other unlawful practices in the corporate and financial environment. Its application is particularly relevant in litigation.

Forensic Finance focuses on the detailed analysis of financial transactions with the objective of detecting suspicious or fraudulent activities. Its application has been key in identifying accounting fraud within private companies, dismantling embezzlement schemes and gathering evidence in business disputes. The increasing sophistication of financial fraud has made the involvement of experts in forensic accounting analysis essential in supporting legal claims and defence strategies before courts.

In this article, we analyse how a specialised financial report is not merely a supporting document, but rather the cornerstone of a successful legal strategy.

Usefulness of a Forensic Finance Report in judicial proceedings

Forensic Finance reports are a fundamental tool for lawyers and corporate legal advisers. These documents provide technical evidence and detailed economic and financial analysis, enabling litigation to be substantiated in cases involving accounting fraud, fraudulent insolvency, misappropriation of assets and other commercial disputes.

A well-prepared forensic report allows irregularities in a company’s financial management to be clearly demonstrated in court, facilitating favourable rulings in cases involving contractual breaches, claims for economic damages or corporate insolvency proceedings. In addition, such reports play a crucial role in litigation arising from shareholder disputes, where it is necessary to quantify the economic damage caused by improper financial practices.

Maraz Corporate Finance provides economic forensic analysis services to lawyers and law firms in Spain, delivering robust expert reports that can be decisive in the resolution of financial disputes.

Through a specialised team focused on the reconstruction of accounting operations and the analysis of suspicious transactions, Maraz Corporate Finance has established itself as a key ally in the legal defence of companies and individuals who require documented evidence in order to assert their rights.

Critical scenarios where Financial Evidence is decisive

The intervention of a corporate finance expert is essential in various legal contexts where economic quantification lies at the core of the dispute:

  • Quantification of Damages: This is the most common use. A precise distinction must be made between actual damages (damnum emergens) — the effective loss suffered — and loss of profits (lucrum cessans) — the profits that were reasonably expected but not obtained. The latter requires projection models based on reasonable and verifiable assumptions, rather than mere “expectations of income”.
  • Shareholder and Corporate Disputes: Valuation of shareholdings in cases involving shareholder exits, minority oppression, or disagreements regarding asset valuation during mergers or acquisitions (M&A).
  • Economic Crimes and Compliance: Investigation of breaches of fiduciary duty, misappropriation of assets, money laundering or fraudulent insolvency. The forensic report is crucial in demonstrating intent or tracing the flow of funds.
  • Insolvency Proceedings: Analysis of solvency and precise determination of the technical insolvency date, a key factor in determining whether insolvency proceedings are classified as culpable or fortuitous.

Tools and Methodologies

The procedures employed in Forensic Finance follow a structured methodology that allows potential financial fraud to be analysed, detected and documented.

First, an information-gathering phase is conducted, during which financial statements, accounting records, bank transactions and corporate contracts are reviewed in search of inconsistencies or suspicious patterns. This stage is crucial to obtaining a comprehensive understanding of the financial situation of the entity under investigation.

Once the information has been collected, the data analysis phase begins, applying forensic audit techniques, financial modelling and trend analysis. During this stage, accounting discrepancies, balance sheet manipulation and unusual transactions potentially linked to fraud are identified. The use of specialised software and artificial intelligence tools allows irregularities to be detected with greater accuracy and efficiency.

Subsequently, experts carry out the reconstruction of financial operations, identifying the flow of funds and establishing connections between accounts, companies and transactions. This process is essential in determining the existence of illicit movements, money laundering or asset diversion.

Finally, an expert report is prepared summarising the findings of the investigation and providing a detailed analysis of the evidence gathered. This report is submitted to lawyers, courts or competent authorities to support litigation, claims or asset recovery proceedings. The quality and robustness of this document are crucial to its evidentiary value in judicial proceedings.

Relevant Cases in Spain

Spain has been the setting for numerous cases in which Forensic Finance has played a decisive role in uncovering corporate fraud in the private sector.

One of the most notable corporate fraud cases in Spain was the Pescanova case. In 2013, the Galician multinational in the fishing sector collapsed after it was revealed that it had manipulated its accounts for years, concealing a level of indebtedness far higher than officially reported. The company inflated revenues and assets through a complex network of intermediary companies that falsified financial documents in order to maintain the appearance of solvency.

The scandal severely affected investors, creditors and employees, leading to judicial proceedings in which forensic financial techniques were used to reconstruct the real flow of funds and expose the fraudulent accounting engineering. The expert analysis was crucial in demonstrating the deception and attributing responsibility to the company’s senior management.

Another relevant case is Abengoa, where the use of accounting engineering enabled the concealment of debt and the overvaluation of assets, ultimately resulting in financial collapse with severe consequences for shareholders and creditors. Economic forensic analysis was key in uncovering the hidden debt structure and establishing legal responsibility.

In the retail sector, the accounting fraud at Dentix, the dental clinic chain, demonstrated how manipulation of financial statements affected thousands of clients and employees. Forensic analysis made it possible to document the company’s fraudulent insolvency and support judicial claims.

One of the most representative examples is the Gowex case, a technology company that falsified its accounts to appear profitable and attract investors, generating multimillion-euro losses. Forensic accounting investigations demonstrated the deliberate manipulation of revenues and made it possible to bring those responsible to trial.

These cases underline the importance of having a rigorous forensic report in corporate litigation. Maraz Corporate Finance provides lawyers and legal advisers with the possibility of obtaining precise accounting evidence to support claims against companies involved in financial fraud.

FAQs on Forensic Finance

What is the difference between an auditor and a forensic finance expert?

Although both work with financial statements, their objectives differ. An auditor seeks to ensure that accounting complies with applicable standards (compliance). A forensic expert seeks evidence relating to a specific fact within a legal dispute (investigation, evidence and quantification). The forensic approach is significantly deeper but focused on a specific event or circumstance being claimed, sceptical in nature and designed to withstand scrutiny in court.

At what stage of judicial proceedings should a financial expert be engaged?

Ideally, the expert should be involved during the pre-litigation stage. Having a preliminary analysis allows the lawyer to determine whether the claim has economic viability and to establish the real amount of damages. An early forensic report helps build a much stronger and better-substantiated claim from the outset.

How is the objectivity of a report ensured if it is commissioned by one of the parties?

An expert’s credibility is their greatest asset. A report that appears to be “tailor-made” for a client will be easily challenged. At Maraz, we follow international standards of independence. Our role is to translate financial reality in a technically rigorous and truthful manner; this objectivity is precisely what gives legal strength to our client’s case.

Is it possible to claim loss of profits without a forensic financial report?

It is possible, but extremely difficult to succeed. Spanish and European case law is particularly strict regarding claims for loss of profits, requiring a “logical probability” that such income would have been obtained. Without a technical report using financial models or market comparisons that reasonably quantify the loss of profits, judges often dismiss such claims.

Conclusion

Forensic Finance has become an essential discipline for detecting and litigating corporate fraud. The ability to obtain robust evidence through financial and accounting analysis is a key element in protecting the legal interests of clients affected by fraudulent practices.

Maraz Corporate Finance provides specialised services in the preparation of expert reports that enable lawyers and legal advisers to substantiate claims and economic litigation.

In an environment where financial fraud is becoming increasingly sophisticated, having a well-structured forensic report can make a decisive difference in the outcome of litigation. For this reason, legal professionals requiring assistance in preparing economic evidence can rely on Maraz Corporate Finance as a strategic partner in the fight against corporate fraud.

If, as a lawyer, you require a forensic expert report of an economic-financial nature to support a judicial claim or an out-of-court negotiation, please do not hesitate to contact Maraz Corporate Finance.

Javier de Rojas Roca de Togores

Partner – Maraz Corporate Finance