1. What is a Forensic Accountant?
Many people think that Forensic Accounting has something to do with death or dead bodies. It doesn’t. Rather, forensic accounting is a specialty practice area of accounting that involves working with clients and their attorneys on legal matters.
2. How is a Forensic Accountant different from other accountants?
Forensic Accountants testify in court as an expert witnesses, while traditional accountants are usually called as fact witnesses. In addition, traditional accountants prepare financial statements and tax returns in specified formats. For example, all personal tax returns are filed on the same form – Form 1040. Forensic Accountants are free to tailor their presentations to best explain the issues under consideration.
3. What do Forensic Accountants do in divorces?
In family law, Forensic Accountants focus on valuing the marital estate, determining which assets and liabilities may be non-marital, determining the parties’ incomes, and calculating alimony and child support. Forensic Accountants also testify in hearings and at trials.
4. Is forensic accounting the same as litigation support?
Not always. Traditional accountants can be called as fact witnesses to support a case in litigation. On the other hand, a Forensic Accountant may be called on perform an analysis for a situation that is not in litigation.
5. When should I use a Forensic Accountant in a divorce?
I believe that most divorces should have a Forensic Accountant involved. While many attorneys are very good at reading tax returns and financial statements, Forensic Accountants can look at the information through a financial lens. I have seen cases where “W-2 employees” have hidden assets and income at the IRS. Forensic Accountants are especially needed when there is a closely held business involved.
6. How should I choose a Forensic Accountant?
Be sure that the Forensic Accountant has the education, credentials and experience to assist you and your attorney through your divorce. In the case of a litigated divorce, it is important that the Forensic Accountant have the necessary credentials to be accepted as an expert witness by the court, has sufficient experience in family law, and understands court proceedings.
7. Does each party have to have their own Forensic Accountant?
No. Financial information should be readily available to both parties in a divorce. When there are two Forensic Accountants, it is sometimes difficult and expensive to obtain relevant documents. By sharing a Forensic Accountant, professional fees are much lower, and documents tend to be more readily produced.
8. What does it mean when a Forensic Accountant is independent?
Accountants take an oath to protect the public trust. Forensic Accountants cannot advocate for their client, but rather, they advocate for their opinion. And their opinion shouldn’t change depending on who retained them, or who is paying the fees. In that regard, Forensic Accountants are independent.
9. What does it mean when a Forensic Accountant is neutral?
When both parties hire their own Forensic Accountant, the accountants will usually agree on about 80% of the financial issues. A neutral Forensic Accountant can represent both parties and identify the items that need to be negotiated, mediated or decided by a judge.
10. What about the cost of hiring a Forensic Accountant?
Financial decisions made during the divorce will impact your life and your children’s lives for a very long time. Even if a case seems simple, it is important that the assets and liabilities be properly valued, and the parties’ income be properly calculated for spousal and child support. Costs can be contained by hiring a neutral Forensic Accountant. It is always important to ask: should I pay a little more to make sure it’s right? Probably, because it is the rest of your life.