Forensic accountants

Forensic Accountants: What They Do and When to Use One

Forensic accountants are growing increasingly popular in divorce cases, and for good reason – unraveling a couple’s financial picture and then dividing that equitably is tricky business. Oftentimes, it’s distrust that income is being withheld or even hidden that leads a person down this path. But you shouldn’t think of a forensic accountant as a financial spy – they can be an incredibly useful resource that can take the pressure off you and your ex to paint a complete and comprehensive financial picture. A forensic accountant can be very helpful when there’s a financial conflict or some confusion. They can also help with business valuations when a business is joint community property, or if the business is owned by one partner but has community interest. And a forensic accountant can also determine community interest of a separate property – and whether requests for reimbursements or credits are legitimate.

An  increasing number of my clients have chosen to work with a forensic accountant, particularly when it comes to determining total assets available for child and spousal support in situations when:

  • one party is self-employed,
  • you share ownership in a business with your spouse, and
  • when separate contributions have been made to a joint asset.

What does a forensic accountant do?
Their job is to use accounting and auditing skills to investigate activities that have taken place in a financial setting, typically for the purpose of the information being used in court. In divorce, they work to uncover the true value of assets and any assets that may be under-valued; they work to identify each party’s true worth (particularly if one or both of you runs a cash-based business), and they comb through your personal and self or jointly-owned business assets for even the most minute discrepancies.

In terms of deliverables, you can get a forensic accountant’s help in preparing:

  • Asset identification, clarification and valuation,
  • A plan for dividing your assets and liabilities,
  • Lifestyle analysis and calculations for child and spousal support.

In what situation(s) should you hire a forensic accountant?
If you think your ex is not being forthcoming with their true financial picture, it’s a good idea to hire a forensic accountant. But you and your ex may also wish to hire a forensic accountant jointly if you own or share ownership in a business, if one or both of you acquired investment properties during the marriage, if one or both of you believes you have substantial debts, or if you believe you will need to appear in court at some point to review complex assets. A forensic accountant is trained to look at the most minute financial details, and can be the one to testify in court about your and your ex’s finances – so you don’t have to. After all – a forensic accountant doesn’t take sides. They’re there to be an independent expert, not a witness there to advocate for you or your ex.

How should you find/hire a forensic accountant?
Like most attorneys, financial planners, mediators and others you may have already come across during the course of your divorce, you can expect that a forensic accountant will offer an initial phone call or consultation free of charge. To find that person, you can visit websites and make calls to membership organizations that can likely share with you a list of members in your area, such as:

What should you expect when working with a forensic accountant?
Be prepared to talk about your assets, debts, income and expenses. You will likely spend some time discussing your divorce case, and what led you to decide to hire a forensic accountant. They will likely have a list of documents they will ask you for, but you can pull as much documentation as you can before this first meeting, including:

  • Previous 1-2 year’s taxes
  • Mortgage documentation
  • Bank statements
  • Corporate tax returns and general ledgers (i.e. Quikbooks)
  • Investment + retirement account statements
  • Credit card statements
  • Car titles
  • Documentation of any debts
  • Pay stubs
  • Loan applications

From here, your forensic accountant will do a preliminary review of documents. They may have additional questions for you or require additional documentation. Then they’ll formulate a plan of action, perform their analysis and prepare a final report.

The timing of this process varies depending on how complex your financial assets are, but you should expect to wait at least one month for this report. Can this process lengthen the divorce process? Yes. But this is a process you don’t want to rush. You could be risking assets that are due to you, that could help put you on stronger financial footing as you enter your next chapter.

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