When a company’s reported accounts do not line up with the company’s actual business, alarm bells sound around false accounting. False accounting means dishonestly reporting inaccurate summaries of a company’s business.

False accounting is a serious criminal offence which can carry a custodial sentence. Prosecutors often see it as a fraud. Those convicted of false accounting may also be disqualified from running a business or becoming a director. With such grave penalties, anyone involved in the accounting of a company must be aware of their responsibilities.

What is the legal definition of ‘false accounting’?

The offence of false accounting is set out at section 17 of the Theft Act 1968:

1. Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another:
   1. Destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or
   1. In furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular; he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years.
2. For the purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.

Though the law seems cryptic, it is easier to understand when reworded:

• Part 1) An individual falsifies, conceals or otherwise obscures an accounting document
• Part 2) The individual did so knowingly and with a view to either gain themselves or cause someone else to incur a loss.
• (Anyone who knowingly assists with the process is also liable)

Accordingly, senior staff of a business can be held liable for the poor accounting practice of their juniors.

Should the authorities have a cause to suspect false accounting, they may or may not alert you to this fact before a formal investigation is launched.

Can the police search my premises?

The investigating authority can search premises and demand documents for inspection in a ‘dawn raid’. You may not be warned of any premises search ahead of time.

Why is false accounting an offence?

Companies in the United Kingdom must make their accounts public through Companies House. Publishing accounts generates confidence; a creditor or investor to a business can see that the business is not insolvent, for example. Anything which undermines that confidence can harm the wider economy, so the law aims to prevent false accounting by criminalising it.

Mistake or Dishonesty?

Falsifying accounts by accident can draw its own penalties but it does not meet the threshold for fraud in this area. A simple typo is unlikely to lead to prosecution. However, the prosecution may look at other accounting samples linked to the original accounts.

What is a shell company?

Individuals can set up ‘shell companies’, which likely exist in name only, to serve as a client. The shell company is sent an invoice from the original company for work which never happened. The original company then reports this invoice as a sale in the accounts. At their highest, these frauds pass through countless layers and operate in parallel with legitimate companies, making identifying the fraud difficult for the authorities.

What will happen if I am arrested for false accounting? 

If you are arrested for this offence, you will be taken to a police station for the purpose of being interviewed under caution. Among other rights you have the right to be represented at this interview by a solicitor free of charge. This is usually a duty solicitor nominated by the police. You also have however the right to nominate a solicitor of your choice. The solicitor will be able to obtain some information from the investigators about why you have been arrested and will be able to discuss this with you and provide you with advice prior to the interview.

ABV Solicitors have expert fraud solicitors, experienced in false accounting matters, who can attend the police station on short notice nationwide.

What should I do if I receive a letter from a crime enforcement agency such as the police, HMRC, FCA or SFO requesting me to contact them to arrange a voluntary interview? 

Upon receipt of such a letter it is critical that you seek the assistance of a solicitor immediately. ABV Solicitors will allocate a specialist false accounting solicitor for you and make arrangements on your behalf to liaise with the investigators and facilitate an interview at your convenience.

This will allow sufficient time for you to arrange a face-to-face meeting with a specialist solicitor in advance of any interview so you can be advised, and fully prepared on what to expect.

We are here to fully support you and those concerned during this difficult time. Obtaining immediate legal advice can make all the difference to the outcome of the investigation.

What if I am released under investigation or released on bail for false accounting and need a solicitor or wish for a second opinion?

This can be an extremely stressful time for you, your family and your business.

You may have already been interviewed and released on bail or released under investigation. You may have not used a solicitor at all during your interview or are not confident with the solicitor who represented you and require a specialist solicitor with experience in this area.

Whatever the situation, ABV Solicitors have a dedicated team of experts who are experienced in this field and who can provide you with sound advice and assistance.

What if I am charged with an offence of false accounting?

If you have been charged with false accounting you must seek the assistance of a defence specialist immediately. ABV Solicitors have a dedicated Fraud and Financial Crime department consisting of experienced solicitors who are specialist in this field.

ABV Solicitors can provide immediate advice and assistance and assist you and your business during this stressful time.

Restraint Orders and Account Freezing Orders 

Law enforcement agencies such as the police, HMRC, FCA or SFO often use ancillary powers in addition to making arrests and search warrants. These include applying for Restraint Orders or Account Freezing Orders under the Proceeds of Crime Act 2002.

The purpose of this is to prevent those under suspicion to dissipate assets which may have been acquired through the commission of committing offences.

These Orders are draconian and can cause severe disruption to the lives of individuals and those connected to them including their businesses.

ABV Solicitors have a dedicated team of experts within their Fraud and Financial Crime Department who specialise in tackling these Orders.

If any of the above circumstances apply to you or someone you know contact ABV Solicitors Fraud and Financial Crime Department immediately on 0344 587 9996 or visit our website at www.abvsolicitors.co.uk

ABV Solicitors are available 24/7 and offer their professional expertise and assistance nationwide.