Fraudulent trading: a forensic accountant's perspective by George Sim
The “credit crunch” and the expected downturn in the economy are likely to put pressure on many businesses' finances and may lead to the discovery of instances of fraudulent trading.
By way of example, on 16 May 2008, Peter Bradley was sentenced to four years' imprisonment at Liverpool Crown Court and was disqualified from acting as a company director for 10 years, having pleaded guilty to one count of fraudulent trading. His company, Alta Gas, a bottled gas business with seven filling plants and 30 depots nationwide, collapsed in 2001; during the receivership it was discovered that fictitious sales had been created and that the profitability of the company had been misrepresented to providers of finance.
Fraudulent trading occurs when a business continues to trade at a time when there is, to the knowledge of the business's management, no reasonable prospect of creditors ever receiving payment. This includes a situation such as Alta Gas in which there are no good grounds for thinking that the business can pay its debts even if its management
