Forensic accounting is the practice of looking at paperwork and finding irregularities or evidence of fraudulent conduct. It is often used when auditing companies, but it may also be used during property division in cases of contentious divorce where large amounts of assets are jointly owned. It is especially useful when a business or businesses are owned by parties in the divorce as this may be a way that one spouse “hides” money from the other spouse or masks an income.
The more money a person has, the more paperwork is necessary to examine in order to find evidence of irregularities or outright fraud. Jointly owned property must be jointly split, but if one party has greater access to or understanding of the finances, this may be difficult. A forensic accountant, in addition to finding irregularities and helping to draft a more equitable division of property and assets, may also be able to represent one party in court.
Some of the specific practices performed by forensic accountants include analyzing trends from tax returns, examining payroll and income documents, identifying unethical practices such as overpaying creditors or creating fake debt or looking for dummy corporations. Forensic accountants may also be able to assist with valuation for businesses in order to determine a “true income” and “true assets” statement in order to negotiate a fairer divorce settlement.
Forensic accounting goes hand in hand with the traditional services of a divorce attorney. A divorce attorney’s job is to represent a client in a contentious divorce both in court and at the settlement table in order to ensure an equitable split of assets as well as fair custody arrangement and other concerns. A divorce attorney can work with a forensic accountant as part of a divorce team on behalf of a client’s best interests.
Source: Forbes, “Why A Forensic Accountant Belongs On Your Divorce Team“, Jeff Landers, September 04, 2014