What is a Forensic Accountant’s Role in a Divorce?
Most frequently a forensic accountant’s role in a divorce (now termed dissolution of marriage) is in the courtroom as an expert witness. As an expert witness the forensic account is allowed to testify in his/her area of expertise even though never having, been witness to any occurrence relating to the lawsuit. The areas of expertise of a forensic accountant include accounting, auditing, and investigative skills involving monetary considerations and concerns. And, when it comes to a divorce, there are a number of monetary considerations and concerns where the expertise of a forensic account can often prove or disprove an issue being presented and/or contested. In fact, in all divorces there are four financial considerations, income, expenses, assets, and debts, all of which can, when needed, be examined, investigated, and reported on by forensic accountants.
In addition to courtroom testimony, a forensic accountant can be of great help as a consultant to a Family Law attorney as he/she is preparing a case for the client. Four of the most disputed and important issues to be negotiated when dissolving a marriage are alimony, equitable distribution of assets and liabilities, child support, and retirement programs. While couples should be up front with information in these areas, unfortunately this does not always happen. This is particularly true when one party has had control of the “purse strings” during the marriage and for whatever reason has not shared the financial side of the marriage with their spouse. As a result there can be a hiding or deferring of income and assets or in some cases quietly transferring to others what should have stayed in the marriage. A forensic accountant can, by use of their expert knowledge and experience in the areas of financial document analysis, auditing techniques, and accounting procedures, ferret out the truth with regards to actual income earned, acquisition of marital assets, taxes paid, true market value of a business, and debts paid and owed. In shortened terms, as Darrell Dorrell, a forensic account puts it, forensic accounting is “The art and science of investigating people and money”, a most useful tool during divorce litigation. The information a forensic account can discover is available to anyone but is most often used when a large amount of money, a business, or high end income, assets and liabilities are in question. As the cost of obtaining in depth financial information is a factor to consider, it is usually wise to weigh the perceived benefits against the investigative costs.
On a more positive note, when there are a number of extenuating circumstances surrounding dissolution of marriage, there are additional ways a forensic accountant can help. These professionals are qualified to help determine who should receive child support and how much that support should be. A thorough look at the past, present, and projected post-divorce lifestyle of a family can help determine if alimony is appropriate (and this can be for either spouse) and if so, what kind and how much. Too, lifestyle analysis can determine if either spouse is pretending to live higher or lower than in actuality, which could affect the amount of alimony and child support paid or received. In the case of a business owned and managed by a spouse it will be important to be sure there are not two sets of books, one for the IRS and one for the owner’s view as well as learning if the spouse is using an inappropriate amount of business income to pay personal expenses.
The bottom line for an attorney handling a divorce is to help their client receive what is right and fairly due them as a result of their client’s years of marriage. And, when minor children are involved, it is equally important they will be cared for financially as well as emotionally and physically. The use of a forensic account as a consultant and/or an expert witness to present their findings to the court can often make the difference between a fair outcome and an outcome favoring an undeserving spouse.