28 Aug

Digging Into the Divorce Lifestyle Analysis

In an ordinary lifestyle analysis, the divorce financial analyst extracts all of the transactions from bank, brokerage and credit card statements, categorizes them and calculates totals for each category for the period under analysis. This is an important exercise to assess what the parties to a divorce have historically spent and determining an appropriate level of support. It can also be used to determine whether a spouse was wasting or dissipating marital assets.

More importantly, the lifestyle analysis can also be used to uncover hidden income and assets, or help prove that one spouse is living a lifestyle that exceeds the reported sources of income. The typical lifestyle analysis may only scratch the surface of the financial facts of the case, leaving behind important clues about the finances of the parties. Diving deeper can uncover hidden finances that may have otherwise been overlooked.
Uncovering Hidden Assets

A thorough lifestyle analysis can help discover assets that may have been undisclosed in the divorce. Each and every transaction from the bank, brokerage and credit card accounts must be traced to determine where the funds went. It is important to ensure that all statements have been received and analyzed, as one missing statement could hold the key to a hidden asset. Read More

24 Aug

Conducting Internal Fraud Investigations

Fire drill training in grade school always included the mantra, “Stop, drop and roll.” This was the prescribed course of action if you were on fire. Professionals sometimes refer to tragedies in companies as fire drills. When a major internal theft occurs, it is akin to catching on fire, and needs to be met with swift action.

Where there is smoke, there might be fire. There are numerous potential red flags that might point to internal theft – things like missing or altered documentation, numerous unexplained accounting entries, excessive customer complaints about account balances, and disregard or override of procedures.

While one red flag alone does not necessarily mean a fraud has occurred, the presence of numerous red flags increases the suspicion of internal fraud. It is important to quickly identify the red flags, determine who might be responsible, and take quick action to extinguish the problem. Read More

22 Aug

Litigation Support Work for CPAs

A CPA who focuses on traditional tax work or auditing services might be a great fit to branch out into litigation support work. Attorneys are always looking for expert witnesses with certain areas of expertise, and accountants doing general work might fit the bill.

What is your focus? Do you specialize in a certain industry or work frequently with certain accounting and tax rules? Litigation work is often interesting, but you have to be able to explain your work to non-accountants and testify in depositions or at trial.

The video below offers Tracy Coenen’s commentary on this topic.

15 Aug

Calculating Income in Divorce Cases

There are four widely recognized methods of calculating income in divorce cases. These four methods have been developed for use by the Internal Revenue Service in calculating unreported income in tax cases, and are the primary ways a lifestyle analysis can be completed.

Specific Items Method
One of the most straightforward ways to complete a lifestyle analysis is through an analysis of specific items of income. This method is possible when there are substantial documents detailing cash inflows, and is considered a “direct method” of verifying income.

Income-related information is gathered from bank and brokerage statements, tax-related documents, and business records. Inflows are identified and summed, theoretically verifying the income disclosed in the family law case. This method is easy to understand and present, which makes it an attractive option for evaluating claimed income. The court will easily be able to understand how income was calculated. Read More

07 Aug

Calculating Support in Family Law Cases

divorce financial analysisSpousal support (alimony) and child support can be calculated using a number of different factors. The relative importance of the factors may be laid out in local rules, but often the factors are simply listed and defined with little other guidance.  Considerations may include:

  • The actual earnings of each person, including wages, investment income, and other sources of income
  • The earning capacities of each party, both independently and relatively
  • Future earning capacities of the parties
  • The value of the assets divided, and the ability of those assets to produce income
  • The cash flow of each party Read More
03 Aug

Divorce Issues: Evaluating Income of Cash Businesses

When a closely-held business is part of a divorce, the income of the business must be examined. It is not unusual for a business like this to suddenly see a decline in revenue, and increase in expenses, or both shortly after divorce is filed. It is often not a coincidence that the financial health of the business appears to suffer when a divorce is pending.

It is particularly difficult to examine the income of a business that transacts with its customers primarily in cash. However, there are ways to verify whether the income being reported is reasonable. Some of the techniques to examine and verify the income of cash businesses include: Read More