The role of a Forensic Accountant in a divorce is not well known. Erin Palmer offers great insights into this valuable professional who can help uncover hidden assets or income of a deceptive spouse. Here is Erin's blog:
All’s Fair in Love and War, Except in Divorce – That’s What Forensic Accountants Are For
You aren’t alone. Many couples considering divorce find themselves in a predicament they never expected to be in and begin to look at each other in a new light. Here’s one scenario: One spouse may be shuffling money around and squirreling it away. The other is offered a piteous settlement and is none the wiser, but instinctively feel that the numbers just don’t add up. Here’s a second scenario: One spouse offers the other a blunt settlement with no questions asked, without a way to alter the settlement later on. Both scenarios should be considered cautionary tales. If your intuition is telling you something isn’t adding up, or your divorce lawyer recommends getting a forensic accountant, you should listen. Large corporations aren’t the only ones guilty of moving and hiding assets these days.
Three Things You Should Know About Forensic Accountants
1. Why You Need a Forensic Accountant
It’s such a simple question to ask, “Why?”, but the answers can vary greatly. An article posted, April 30, 2012, on the Wall Street Journal’s website gave staggering data from several studies…
· 31 percent of U.S. adults who join their earnings and savings with their spouse or significant other admitted they have been deceptive about money at times. – National Endowment for Financial Education
· 58 percent from the same study (mentioned above) admitted they hid cash, as well. – National Endowment for Financial Education
The Wall Street Journal article goes on to report something else of significance – technology is playing a larger role in discovering deceptive financial practices between couples.
· During a 2010 survey, members of the American Academy of Matrimonial Lawyers were asked if in the past five years had they had seen an increase of information and evidence used that was gathered from social media/social networking websites (think Facebook, LinkedIn, Twitter). Can you believe that 81 percent of the members said yes?
· Two years later the members were polled again with the same question and the number of lawyers answering yes climbed to 92 percent. That’s an increase of 11 percent in just two years.
2. What Forensic Accountants Look For
Forensic Accountants are highly trained professionals who may also possess a CPA license as a result of passing the Uniform CPA Exam. These financial professionals have received specialized training in locating financial information through research and technology. When a forensic accountant is assisting with a divorce, one of the first things they review are tax returns belonging to both parties. Believe it or not, a forensic accountant can learn a lot from a tax return such as real estate information, investments, partnerships and businesses, trusts and estates, and much more. Once they’ve reviewed this information, the forensic accountant can branch out and continue digging.
Other items forensic accountants look for are things like unreported retirement funds and decreased earnings being reported by the main bread winner. An unreported retirement fund is a deceptive practice. And decreased earnings may not be a red flag to most lay people, but to a trained professional this could lead to much more. They will look to see when the earnings first started to decrease and study as to whether they can put a tangible reason to the decrease or if it looks like money is being funneled in another direction.
Another task a forensic accountant may perform requires the use of specialized computer programs that can sift through all the data that is currently living on a hard drive or had once been there. Yes, even if data has been deleted from a drive, the information remains deep within the heart of the hard drive and these professionals have the ability to try and retrieve it.
The work of a forensic accountant isn’t always structured around finding a deceptive spouse. They also help lawyers create financial statements based upon their review of the couple’s assets. This has proven to be very helpful in creating an accurate financial picture that presiding judges can utilize to make his or her decision on the separation of assets.
3. If You Want It Done Right (Legally), Hire a Professional
When it comes to divorce, emotions can run high. And it’s natural to have your anger and frustration build. However, trying to take matters into your own hands is not advisable. If you have decided to Google or follow your spouse’s trail online and started finding information pertinent to your case, discuss this with your lawyer first.
The Wall Street Journal article “Why Hiding Money From Your Spouse Has Gotten a Lot Harder” mentions the grey area between following your soon-to-be former spouse’s online history versus putting a key logger on their computer. A key logger can be a piece of hardware or software installed on a computer that records the actions of whomever is using it.
If you are considering going rogue and ‘bug’ your spouse’s computer, it is very important that you talk to your lawyer first. More than likely they will advise against it and the information obtained may not be admissible during your legal proceedings. Not to mention, you could end up in legal trouble of your own.
If you are considering divorce and want to allocate your assets properly, or suspect your family’s assets have been mis-handled or-represented by your spouse, a forensic accountant will be your best line of defense next to your attorney. There are various reasons why you would hire this type of legal representation but for those who may not know the benefits to hiring a Forensic accountant or how to hire the right CPA for your situation, it is highly suggested you research or interview multiple professionals in search for the best fit for your situation.
Erin Palmer writes about CPA exam review and CPA continuing professional education for Bisk Education.