16 Jan

Manual Cash Disbursements and Fraud

Companies typically have a standard way of initiating cash disbursements like payments to vendors or employees. Often this involves entering an invoice into the accounting system, ensuring proper approval for payments, and then generating the electronic transfer or check. Sometimes invoices are entered at scheduled intervals and payments are issued on certain days of the week.

Any disbursement that falls outside of these procedures could be considered a manual disbursement. That is, it is initiated manually and issued under special circumstances.

Probably the most common type of manual disbursement occurs in a company that has an accounts payable process through which all vendor payments should flow. Suppose a vendor drops off materials and needs to be paid immediately for that delivery, and there is not a chance to get the vendor payment through the regular accounts payable process. A check will be cut directly to the vendor, and the accounting system is updated later. This is a classic example of a manual disbursement. Read More

14 Jan

Documents Needed to Investigate Business Interests in a Divorce

When a spouse owns a business, it can create some of the most complicated financial issues in a divorce. It is extremely important to dive into the financial records of the business in order to value it and to determine where the money is REALLY going. Tracy Coenen and Miles Mason discuss what documents a forensic accountant needs to evaluate the business.

11 Jan

Why Do a Business Lifestyle Analysis?

I often talk about doing a lifestyle analysis in divorce, where I go through the personal spending of the parties in detail and make calculations surrounding the spending. But what about doing the same type of lifestyle analysis for a business? Why would we want to do that?

Closely held businesses present special challenges in the family law setting. Typically, only one spouse is actively involved in the business. Therefore, not only does the spouse control the family’s finances, he or she also controls all of the records of the business. When a spouse is attempting to quantify the income from the business or the value of the business, the spouse who works actively in the business can purposely (and often very effectively) obstruct attempts to get accurate and complete data. Read More

08 Jan

How to Perform Analytical Review

When investigating fraud, I often find it useful to perform analytical review on the financial statements of a company. Even when management is certain that they know where the fraud occurred within the accounting system, analytical review can help identify unsual things about the numbers that may warrant further investigation.

Ratio analysis and analytical review procedures are very familiar techniques for financial statement auditors. While analytical procedures may seem elementary, they can be very important in giving clues to areas of the financial statements that may contain fraud.

Analytical review involves comparing changes in numbers between accounting periods (horizontal analysis) and the relationships between certain financial statement line items (vertical analysis). The numbers for a business typically have certain predictable patterns, and when the financial results fall outside those parameters, it may be cause for concern.

Typical sets of data to be compared during analytical review can include: Read More

02 Jan

Rebuttal Reports for Lifestyle Analysis

divorce financial analysisWhile a financial expert may be retained to proactively complete a lifestyle analysis in a divorce case, one might also be retained to do a rebuttal report focused on the analysis of an expert retained by opposing counsel.

The process is no different than if the lifestyle analysis is being done proactively. Income and expenses are tabulated, categorized, and allocated using the methodology I describe on this blog and in my book, Lifestyle Analysis in Divorce. Read More