AS FOREIGN DIRECT investment continues to pour into China - roughly US$60 billion in 2005 - forensic accounting specialists have seen something of a boom in business.
Today's potential foreign investors in China want financial due diligence, corporate due diligence and integrity due diligence, as well as thorough examinations of corruption risks, anti-money laundering risks and general fraud risk - all of which are grist to the mill of forensic accounting practices.
According to Chris Fordham, principal of Forensic and Dispute Services for China at Deloitte Touche Tohmatsu, forensic accounting specialists can play a crucial role by examining potential risks before acquisition and by helping prospective investors put in place a post-acquisition methodology to overcome them.
Working on this basis, many of them will at some point experience the machinations of the Foreign Corrupt Practices Act (FCPA). This United States legislation, which came into being in 1977, forbids US entities and citizens doing business to make corrupt payments or bribes to public officials in foreign jurisdictions for the purpose of obtaining or keeping business.
The difficulty in the FCPA being applied in China is that by virtue of government interests being so wide, the definition of a public official is also very wide.
Doctors, for example, work in state hospitals and are by definition public officials. Even a petty kickback or enticement payment to get a doctor to prescribe a particular company's drug could be considered a breach of the FCPA.