Sometimes divorce is simple to execute – savings accounts get split 50/50, furniture goes back to whoever purchased it, the family home gets sold and proceeds divided. Other situations are more complex. Assets like investments in closely held businesses, stock compensation, natural resource investments and properties in different states or different countries can make even the friendliest of splits difficult to manage. And what if the separation isn’t so friendly?
In situations where a spouse is harboring enough resentment to be misleading on his or her financial records, making sense of reports and projections can be challenging. A 2012 story of a Russian billionaire’s $88M attempt to hide marital assets during a divorce may be unique in terms of money involved, but not in principle. The sad reality is that some spouses will go to great lengths to hide assets and income. A forensic accountant can help.
Common divorce scenarios: a forensic accountant can help
There are three common divorce scenarios where involving a forensic specialist sooner rather than later can save your client a lot of money and potentially prevent a financial disaster.
Scenario 1: Spouse stalls on delivering asset details – just to send voluminous and disorganized documentation at the last minute.
Unfortunately, this situation is all too common. When faced with 3 boxes of piecemeal bank statements, tax records and business agreements, it is easy to feel overwhelmed and confused. After all, someone will have to spend long hours digging through thousands of pages – some relevant, some thrown in for volume – to assemble a complete puzzle of a complex financial situation. If you are facing a pile of random financial bits and pieces and aren’t sure where to start, you should know that a forensic accountant is equipped to handle this scenario. With specialized training in spotting trends and patterns, your forensic specialist will get the hopeless pile organized, identify missing pieces, and ask the right questions to guide your next steps.
Scenario 2: Income numbers do not seem right.
You’ve got the financial statements, but something about the income numbers just does not feel right. This is a good time to bring in a forensic accountant to trace transactions and analyze tax returns over several years looking for patterns and unexplained changes. Forensic specialists are great at spotting explanations that don’t make sense, and can even identify unethical practices like making payments to a dummy supplier, padding payroll, or under-reporting income numbers.
Scenario 3: Assets go missing.
Hiding valuable assets is a common way that dishonest spouses can try to pad the settlement in their favor. Some of the methods include hiding unrecorded cash receipts from a business or transferring asset ownership to family members and friends. Forensic accountants understand where assets might be hidden and can look for transactions that were orchestrated to conceal them.
In summary, hiring a forensic accountant can add tremendous value. Not only do you get the comfort of knowing that the divorce agreement is based on real numbers, but also you are setting your clients up for a more financially secure future. If your client is suspecting financial dishonesty on the part of the spouse, lean on the expertise of qualified professionals to secure the settlement that your client deserves.