USA Valuing African investment involving fraud investigation

[Jamie Woodruff]

I'm a CFO of a private equity management company. We manage funds with some assets in South America and Africa. One of our African investments had a very late arriving 2016 audit and over the last 3 months we understand they have been dealing with a fraud issue that appears to have a material impact on their books and, not surprisingly, the company is also experiencing a liquidity crisis. A top tier CPA firm has recently conducted a forensic audit and their report states their ability to understand the full scope of the issue(s) was negatively affected by the current management's inability and/or unwillingness to provide accounting information - thus the impact of the fraud is a wild guess at this stage.

Our investment was valued at approximately $4 million USD for 2016 and we will need to assign some value in the coming weeks for YE 2017.

Does anyone have any experience in assigning a value on this sort of situation (when fraud is involved and the books are essentially a mess with no reliable information from management)? I am currently considering a full provision on the investment. We follow IAS accounting for our fund.

If anyone could point me in the right direction, it'd be quite helpful - thanks!