Your team is in the courtroom. The judge asks how your values and assumptions were determined. Your team responds with a loose explanation, little back up support, and notes your information came solely from your client’s testimony. The judge asks the same question to opposing council. “We relied on certified financial experts. Please see reports ABC, line items DEF, and exhibit XYZ. Information has been obtained and validated from third party sources and noted on the supplied index. The expert’s findings indicate an additional $250,000 ‐ $275,000 of non‐disclosed marital assets exists. The spouse’s income from a material partnership interest should be $100,000 more per year – as specified in the reasonable compensation analysis”. A bead of sweat forms on your brow, your client is visibly irate, and it’s immediately apparent who won this battle.
You want to ensure contentious financial matters are answered in a comprehensive and professional manner – to educate and inform the court, ensure fairness, perform adequate due diligence, and maintain credibility. Increasingly complex financial affairs now require skills of a forensic expert. These specially trained and certified accountants are armed with expertise in financial data collection, preparation, analysis, and reporting. Their capabilities far surpass mere financial inquiry. Experts piece together and communicate ‘the financial story’ ‐ often supplementing financial analytics with interviews, observations, and lifestyle considerations. They are experienced and competent ‐ prepared for questioning and explanation. They excel both in the court room and in non‐litigated matters.
Forensic accountants work as:
- Non‐litigation consultants – provides ad‐hoc services for clients not in legal process;
- Consulting expert – works with attorneys to develop/formulate strategies, defenses, review documents, and assists in preparation of client for trial;
- Fact Witness – acts as expert and only supplies facts to the case. No opinion is rendered; and;
- Testifying Expert Witness – issues a non‐adversarial report, findings, and supported opinion by deposition or testimony.
Forensic experts provide a plethora of services which continue to grow as financial discussions and instruments become further multifaceted.
Hot Topics and Value Added Service for your Client During Divorce
- Tracing Hidden/Sheltered Assets , Net‐Worth Analysis – Analyzing marital spending, income sources, and expenditure outlays can build a persuasive case and/or help identify: hidden assets, unreported income, family worth degradation (i.e. living beyond means), or hidden liabilities. Reviewing for these items can prevent a surprise come settlement time.
- Tracing Commingled/Mixed funds – Determining non‐marital/separate vs. marital components in home equity, brokerage accounts, retirement accounts, business interests and more. The longer a life of a questioned item, the more likely a tracing analysis is to provide significant value for separate fund claims.
- Income Determination/Reasonable Compensation Analysis – How to value work effort? What compensation is practical in cases where one spouse does not work by choice? With self employed individuals or primary shareholders, are compensation and benefits sound? These answers can assist with questions of alimony and/or long‐term lifestyle maintenance.
- Asset valuation – Full valuations are costly and, depending on circumstances, not often essential in answering posed questions. Asset valuations from a forensic expert can provide value ranges based on information from tax returns, financial statements, and other relevant information available.
- Investigating Closely Held Businesses – Closely held businesses pose opportunities for hiding money and creating additional complexity in marital finances. An investigation can review a business in which one spouse believes the other is utilizing funds/profits from the business for their own personal benefit. Other areas focus specifically on questions posed by attorneys, spouses, mediators, and others. Examples include: understanding business operations, disclosing loan covenants, and determining marital work effort.
- Lifestyle Analysis – Supplementing above points, forensic accountants are invaluable for providing insight into family standards of living during the marriage, assisting in determining spousal support and/or child support, and documenting marital waste. In litigated cases, this analysis can be a very powerful tool for presenting arguments. In collaborative cases, the analysis is an excellent tool in helping clients understand historical finances and assisting in future financial preparation.
- Defense in the Courtroom! – We turn to experts when seeking advice and consult. As with buying a car or shopping for a mortgage however, taking the word of only one individual leaves us with many questions: Was I provided with all relevant information? Were the facts presented fairly, and in a manner I could make an informed decision with? Do ulterior motives exist? Different people – different answers – different tactics. Accepting claims at face value from an opposing expert is a disservice and may prove disastrous to asset distribution and monetary claim. There is a science behind forensic accounting but also an collection of advanced concepts and methodologies. A supplementary expert retained can review opposing expert’s reports, assumptions, facts, and testimony. They can provide findings and their own report/s as well.
- Credibility – In litigated cases, an expert can be the primary weapon of offense/defense in identifying material misstatements, manipulations of finances, and intentional omissions in court proceedings and testimonies. In collaborative and non‐litigated cases, they may work with a full team and both parties to ensure all necessary disclosure is occurring.
Forensic accountants are the “go to” for information collection, identifying cautionary areas, and providing support and explanation to financial matters.
For more information, contact Jordan Egert via our online contact form.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
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