SGI FORENSIC ARTICLES

Divorce: How a Forensic Accountant Can Help You and How You Can Help Your Forensic Accountant

About the Author: Saul Gordon is the owner of SGI Consulting, a forensic accounting and consulting firm located in Newport Beach, Orange County, California.  He is a Certified Public Accountant, Certified Fraud Examiner, Certified Internal Auditor and Chartered Accountant (South Africa).  He has testified in court in criminal and civil trials.  He may be reached at 949-278-3599, sgic@mail.com or his website of www.sgiforensic.com
Copyright Saul Gordon September 18, 2009.  All rights reserved.

While it is not possible to discuss everything as relates to forensic accounting in divorce in the space of one short article, a few areas thought to be helpful to your understanding are discussed here in varying levels of detail.  No one-size fits all. 

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. 

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

Consider the following: 

How A Forensic Accountant Can Help You In a Divorce Scenario

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. 

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. Search 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 for a property in which 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. Search for inconsistencies between financial information on certain important documentation.
3. Corroborate financial information with non-financial information.
4. Determine and quantify personal expenses accounted for as business expenses by the other party and which may impact items such as the valuation of a business.
5. Perform a business valuation. 
6. Calculate the cash flow which may be used in calculating support payments.
7. Perform a tracing to be used in determining the separate or community nature of property.
8. Assist 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. Assist your attorney in gathering information to be used in the preparation of subpoenas.
10. Assist your attorney in preparing interrogatories or in preparing deposition or trial questions to be asked of the other party’s forensic accountant. 
11. Review certain work performed by the forensic accountant working with the other party.   
12. Testify in court or at depositions.
13. Should your attorney require them, possibly have contacts with computer forensics specialists, private investigators and other professionals.
14. Provide input during the settlement process on the tax consequences of certain proposed actions.
15. Etc.

How You Can Help Your Forensic Accountant in a Divorce Scenario

Although you are probably not a forensic accountant, you may be in a position to help your forensic accountant.  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 their 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), etc.  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 cautious and let your forensic accountant and attorney know. 

Often, in divorce scenarios, a party getting divorced is emotionally exhausted and wants to hand over control to the professionals hired to help that person through the process.  It is important for you to stay engaged as forensic accountants may be able to greatly benefit from input that you may have to offer, and, by doing so, you may be able to reduce the amount of time and money involved in the divorce process as a whole. 
The thoughts in this article are only the present thoughts and opinions of the author and do not constitute mandates or instructions.  Consult with your attorney and other appropriate certified professionals as needed, or if you are unsure. 

Copyright Saul Gordon August 23, 2009.  All rights reserved.