26 Sep

Hidden Assets in Divorce Cases

Hidden assets can impact both the property division and the award of support payments. Assets hidden by one spouse deprive the other spouse of a share of them. If the hidden assets include income-producing assets such as a business venture or an investment portfolio, the spouse receiving support may receive a lesser amount of support than he or she is entitled to.

Some of the most common personal and business assets hidden during a family law case include: Read More

24 Sep

Prevention After Finding Fraud

After a company has experienced internal fraud and has investigated the situation, how do they address the issue of fraud prevention?

Moving forward after an internal fraud requires that management actually make good on promises to prevent future frauds. It is sometimes difficult to get management to make changes, because they view changes as another cost on top of the cost of the fraud and the investigation. But shoring up internal controls is necessary if the company really wants to improve after a fraud.

The wise members of company management are interested in remediation after an internal fraud is discovered, and often they look to the fraud investigator for guidance in this area. It makes sense to have someone well versed in fraud schemes help management make improvements for the future. Read More

18 Sep

When to Stop Investigating

How does a fraud investigator know when enough investigation has been done on a case? If a scope of work was agreed upon with the client, the investigator should finish that work in order to meet her or his obligations. However, there could come a point in the investigation when the cost outweighs the benefit of further investigation. The client relies on the fraud investigator’s expertise and experience to guide the work. It is not the investigator’s job to spend as much of the client’s money as possible or stretch out the engagement as long as possible.

The fraud investigator should alert the client to the issue, and explain why there may not be much benefit in continuing the investigation. If the client still decides to continue the work, the fraud examiner should cooperate. Ultimately, it is the client’s decision to continue or suspend work. Read More

13 Sep

What is a Divorce Lifestyle Analysis?

The divorce financial analysis is one very specific set of services that can be offered by a forensic accountant. The lifestyle analysis is the process of tabulating and analyzing the income and expenses of the parties. The lifestyle analysis is then used to determine the standard of living of the parties, which will influence support calculations, and maybe property division.

Calculating the lifestyle of the spouses prior to separation can provide insight on the lifestyle the married couple enjoyed and the cost of that lifestyle, as well as the income that is or was required to fund the lifestyle of the married couple. The results may be used to prove a spouse’s financial needs following divorce. In other words, a detailed analysis of the spending during the marriage can be the basis to calculate the funding the spouse needs to maintain a similar lifestyle after divorce.

The lifestyle analysis may also help confirm or refute income claims made by a spouse. If a spouse has declared income that is well below the cost of the lifestyle he or she is leading, the lifestyle analysis may suggest that undisclosed sources of income exist. It may also help identify previously undisclosed assets, which may have a substantial impact on the property division.

The lifestyle analysis is not only used to sort out the numbers post-separation. It may be used to evaluate the finances of each part at the time of a prenuptial agreement. If a party did not make a full and accurate disclosure prior to the signing of the premarital agreement, the spouse may attempt to have the agreement set aside. A prenuptial agreement can also be instrumental in the forensic accountant’s work post-separation, as it provides a starting point for the tracing of funds or assets.

10 Sep

Fraud Investigations vs. Traditional Audits

After management becomes aware of a potential fraud and decides that a fraud investigation is necessary, the process of creating a team, mapping the investigation plan, and requesting information begins. An organized approach is the best way to ensure that all facets of the investigation flow smoothly, that staff is properly assigned and supervised, and that all critical evidence is analyzed.

Many of the administrative parts of a forensic accounting or fraud investigation project are similar to those in a traditional auditing assignment. For those who have played an active role in managing audit engagements, some of this information will be familiar. Read More

06 Sep

What Happens After a Fraud Investigation?

After an internal fraud is discovered and fully investigated, a company and its employees must move forward. That might seem like a simple thing to do, but it is not always quite that easy. The financial blow of an internal fraud can be devastating. Employees have long-term memories that may not allow them to forget about the violation of their trust by someone who worked side-by-side with them or by someone who was responsible for their future.

The most obvious potential long-term effect from an employee theft is financial devastation. Companies lose something on the order of 4% to 5% of revenue to internal fraud each year. Imagine how many companies could be put out of business with a fraud of that size.

The first step to moving beyond an internal fraud, especially a significant fraud, is repairing the financial damage. Often, cash reserves have been depleted and debts have mounted while the dishonest employee was filling her or his pockets. A plan to repair the company’s finances should be established quickly. Read More

04 Sep

The Forensic Accountant as Consultant

Forensic accountants are usually retained in family law cases as expert witnesses, with the intention that they will provide expert opinions and testimony on behalf of the client. Although retention as a consultant is less common, it is an important option to consider. Sometimes, the work of the consultant can be even more important than the work of the testifying expert. The consultant may be able to dig deeper into sensitive issues because there is no fear of testimony or of disclosing the consultant’s work.

Maintaining privilege
One of the biggest benefits to retaining a consultant is the fact that the consultant’s communications and work product enjoy privilege. Because the consultant is essentially an extension of the law firm, the identity of the consultant, the scope of work, the evidence examined, and the results of the work need not be disclosed to opposing counsel. (Note that documents examined by the consultant may very well need to be disclosed as part of the discovery process, but the consultant’s work or impressions of the documents should not be disclosed.) Read More