Divorce: How A Forensic Accountant Can Help You

While it is not possible to discuss everything relating to forensic accounting and divorce in one short article, a few areas helpful to your understanding are discussed here in varying levels of detail. There is no “one size fits all.”

For ease of reference, an ex-spouse or soon-to-be-ex-spouse has simply been referred to herein as “spouse.”

Consider the following:

How a Forensic Accountant Can Help You in Divorce

Very simply put, forensic accounting is accounting that is used in a legal setting.

In a divorce scenario (which may include child support issues), a forensic accountant may be interested in various types of documentation, both business and personal, that can reveal financial information about a spouse. For example, tax returns, accounting records and financial statements, bank statements, cancelled checks, credit card statements, appointment books, sales invoices, business contracts, financial projections, mortgage applications, and other documentation may all be relevant.

Depending on the particular circumstances, your attorney’s requirements and the terms of the engagement, some of the ways in which a forensic accountant can be used in divorce scenarios are as follows:

1. Searching for hidden assets and/or hidden income. This may include searching for hidden bank accounts (including off-shore accounts) and hidden property. For example, the payment of utilities through the other party’s bank account at an address previously unknown to you may indicate the existence of a property owned by the other party or even the existence of an extra-marital relationship (the other party could be paying to house a paramour). A forensic accountant may find assets that the client spouse is unaware of simply because of his or her lack of participation in the couple’s financial affairs. Sometimes the forensic accountant finds things because the other party does not remember or did not keep records – this does not equate to mal-intent.

2. Searching for inconsistencies in financial information on certain important documents.

3. Corroborating financial information with non-financial information.

4. Determining and quantifying personal expenses accounted for as business expenses by the other party which may impact items such as the valuation of a business.

5. Performing a business valuation.

6. Calculating the cash flow which may be used in determining support payments.

7. Performing a trace to be used in determining the separate or community nature of property.

8. Assisting your attorney in preparing document requests of the other party. If you don’t ask for the right documents, you may not get the right answers.

9. Assisting your attorney in gathering information to be used in preparing subpoenas.

10. Assisting your attorney in preparing interrogatories or in preparing deposition or trial questions to be asked of the other party’s forensic accountant.

11. Reviewing work performed by the forensic accountant working with the other party.

12. Testifying in court or at depositions.

13. Should your attorney require them, possibly maintaining contacts with computer forensics specialists, private investigators, and other professionals.

14. Providing input during the settlement process on the tax consequences of proposed actions.

How You Can Help Your Forensic Accountant

Although you are probably not a forensic accountant, you may be in a position to help your forensic accountant in your divorce. You may think this unlikely, but in better times, you may have been privy to the source and use of your spouse’s funds. You may have also visited a business owned or co-owned by your spouse and have an understanding of what documents and records are maintained and in what media. You are also probably familiar with the habits of your spouse and may be familiar with his/her close relationships (those people may assist your spouse in hiding money), travel habits (these may reveal off-shore bank accounts or the existence of a paramour), and attitude towards risk-taking (this may help determine possible strategies used by a spouse to hide assets). Information that may at first seem insignificant to you may be extremely useful to a forensic accountant.

If you are unsure of whether or not a piece of information is important, it is probably wise to err on the side of caution and let your forensic accountant and attorney know.

A person getting divorced is often emotionally exhausted and wants to hand over control to the professionals hired to help in the process. However, it is important for you to stay engaged, as forensic accountants may be able to greatly benefit from input that you have to offer. By doing so, you may be able to reduce the amount of time and money involved in the divorce process as a whole.

(This article does not constitute legal advice or specific advice of any sort. Be sure to consult with your family law attorney and other appropriate professionals, as each situation is different.)

Copyright Saul Gordon September 18, 2009. All rights reserved.