Forensic Accountant for Divorce: How They Can Help in High-Stakes Divorce Proceedings
Forensic Accountant for Divorce: How They Can Help in High-Stakes Divorce Proceedings
By - Jeremiah Grant
Last Updated - April 26th, 2023 7:53 AM
Apr 26
Are you going through a messy divorce and finding the whole process a little overwhelming?
Divorce proceedings are never easy, and they tend to cause a lot of stress for everyone involved.
As a forensic accountants, we have observed the significant role our profession plays in high-stakes divorce cases. During such emotionally charged times, individuals may experience vulnerability and difficulty maintaining objectivity, potentially leading to decisions influenced by their emotions. This is why we recognize the importance of providing impartial and expert financial analysis to assist you in making informed decisions.
When it comes to distributing significant assets and determining spousal support, it is essential that you stay objective, reasonable, and the expertise of a forensic accountant for divorce can be the difference between a fair and biased settlement.
One of the critical ways that forensic accountants can help in divorce proceedings is by performing an in-depth inspection of financial documentation. They analyze tax returns, bank statements, investment portfolios, and other financial documents to calculate the worth of assets, income, and debts. In addition, they uncover hidden or undervalued assets that either side may not have reported.
Before anything else, you first need to understand what forensic accounting is.
Table of Contents
What is Forensic Accounting?
Forensic accounting is a particular type of accounting that involves using accounting and auditing skills to investigate financial crimes and disputes.
The term “forensic” refers to the use of financial expertise to investigate and analyze financial information, often for use in legal proceedings.
Forensic accountants are like financial detectives. They use their auditing, accounting, and investigative skills to detect any financial misconduct or fraud, such as money laundering, money tracing, and other financial irregularities.
They are also qualified to provide litigation support as they are authorized to testify in court as expert witnesses, prepare reports, and help the attorneys in interpreting/understanding financial statements/evidence.
Forensic accountants play a crucial role in helping organizations and individuals like you uncover financial fraud misconduct, help you in cases of commercial damages, personal injuries, and insurance claims, and hold those responsible for their actions.
What kind of cases do these professionals typically handle?
Here are some of the cases that a forensic accountant typically handles
Why You Should Consider Hiring a Forensic Accountant for Divorce?
We have now discussed who forensic accountants are and what they do. But the question remains, why would you look for outside counsel for your marriage dispute? Here are some scenarios in which you might want to consider one:
You have a lot of assets or high-value assets that are part of the divorce proceedings.
Your divorce case is financially complex, and you need expert financial analysis and advice.
You or your spouse are independent contractors or 1099 workers, which complicates income determination and property division.
You and your spouse have a conflict with the property division, and you need an objective assessment of the situation.
You or your spouse own a business, or both of you own one, and the business’s financials need to be analyzed.
Your premarital assets or liabilities are significant and need to be appropriately identified and divided.
To begin, the divorce forensic accountant will collect every necessary tax return for both spouses, as well as any other relevant financial documents, such as bank account statements, investment account statements, and property deeds. They will next carefully examine these documents to look for any red flags or inconsistencies that could indicate financial fraud or wrongdoing.
Investigate Potential Financial Misconduct or Fraud
When a couple goes through a divorce, it is fairly common for one or both sides to take steps to hide assets or income in order to gain an edge in the settlement.
A forensic accountant will often begin an investigation into alleged financial wrongdoing or fraud by obtaining all relevant financial records. They will then carefully examine these documents to discover any red flags or irregularities that may suggest financial misconduct or fraud.
Assess the Value of Business or Professional Practices
A forensic accountant learns as much information about the business or professional practice under question as possible. Once they have all of the necessary information, they use different approaches, such as the income or asset approach, and write a full detailed report of their findings, which helps in a fair settlement.
Expert Testimony in Court
A forensic accountant is eligible to provide expert testimony in court during divorce proceedings. When they are called upon to provide expert testimony in court, their main goal is to present their findings in a concise way that the judge and jury can easily understand.
With their knowledge of the subject, they can assist the judge and jury in making educated choices based on the facts of the case.
How much does a forensic accountant in divorce cost?
Now it’s time for the most important question, how much is it going to cost you?
Divorce forensic accounting can be quite expensive, but it isn’t always the case. The cost varies based on a number of factors, including the complexity of the case, the qualifications of the accountant, the location, experience, and the amount of time and effort they need to put in to complete the work.
Forensic accountants, like most professions, bill on an hourly basis, with rates ranging from a few hundred dollars to several thousand dollars per hour. The total cost will be determined by the number of hours needed to complete the work, as well as any additional costs such as travel expenses, expert witness fees, and court appearance fees.
In simple cases where the value of the business or professional practice is basic and easy to figure out, the entire process may be relatively cheap. However, more complex cases involving multiple firms or professional practices, or needing extensive investigation and analysis, can be rather expensive.
While the cost of a forensic accountant can potentially set you back a few bucks, keep in mind that their services could prove invaluable in divorce proceedings. They can help you in securing a fair and satisfactory settlement by offering a fair and accurate review of the business or professional practice.
Whatever the case, the forensic accounting cost is a small price to pay for the piece of mind that comes from knowing that the settlement is based on solid financial analysis.
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Is it necessary for me to hire a forensic accountant if my spouse has already hired one for our divorce proceedings?
While this highly depends on the specifics of your case, it is advisable that you both hire your own separate forensic accounts.
It is worth noting that the forensic accountant your spouse hired works for them and has their best interest at heart, not yours. Hiring your own accountant can help you get an objective assessment of the situation and ensure that your interests are being protected.
Furthermore, if you and your spouse disagree with the forensic accountant’s findings, having your own expert can help you negotiate a fair settlement. They can also assist you in preparing for any cross-examination questions that may arise during the proceedings.
In certain divorce cases, a forensic accountant may be appointed as a Single Joint Expert. This means they will work on behalf of both of you, saving you time and money. By having one expert working for both of you, you can avoid the need for two separate experts to conduct independent analyses, which can be costly and time-consuming. Plus, working with the same expert can foster a more cooperative environment, making the process smoother and less stressful for everyone involved.
Ultimately, the decision to hire a Single Joint Expert or two separate forensic accountants, or none at all, is yours. Still, it is better to prepare for all likely scenarios in these difficult times so you don’t get caught off guard.
Going through a divorce is never an easy task, especially when it comes to splitting assets and calculating spousal support payments. However, the good news is that forensic accountants can be a valuable resource who can help you in these emotionally challenging times and make the process much easier for you. They can help you by analyzing financial documentation to uncover any hidden or undervalued assets that may not have been reported by either side.
If you’re considering working with a forensic accountant who specializes in divorce proceedings, it can be challenging to know where to start your search. Fortunately, we at Arrowfish are here to help.
Our team of forensic accountants is highly skilled and possesses 20+ qualifications, making us well-equipped to handle even the most complex financial cases. With over 200 years of combined experience across a diverse range of industries, we have assisted a variety of clients, much like yourself, whether it is for their divorce proceedings or their business.
Jeremiah Grant
Jeremiah Grant is the Managing Partner of Arrowfish Consulting. In addition to acting as a primary liaison for many of the firm’s engagements, He primarily focuses on business valuation and economic damages expert witness assignments, in addition to forensic accounting and insurance claims analysis.
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