Understanding Forensic Accountant Reports in California Divorce
High net worth divorce cases in California are rarely simple and often far more complex. When substantial assets, business interests, investments, and complex compensation packages are involved, a forensic accountant will often be essential. Understanding the role of a forensic accountant and how their report can impact your case is critical.
What is a Forensic Accountant in a Divorce?
A forensic accountant is like a financial detective. Their report often serves as a critical piece of evidence when determining how a couple’s marital estate should be divided or how child and or spousal support should be calculated.
These professionals are Certified Public Accountants (CPAs) with specialized training in investigative accounting, audit techniques, and litigation support. In a California divorce, a forensic accountant will closely work your divorce attorney and can engage in various tasks such as:
- Analyze every aspect of a couple’s financial life
- Trace assets and liabilities
- Examine business interests and valuate businesses
- Analyze income available for child and or spousal support
- Identify inconsistencies. irregularities, or hidden or undisclosed income or assets
- Prepare a detailed, court-ready report summarizing their financial findings on the financial issue at play
They also can serve as expert witnesses, testifying about asset values, income, and financial findings that can directly affect property division and support orders.
What Does a Forensic Accountant Actually Do?
When you engage with a forensic accountant, their main courses of actions will be:
- Tracing what is separate property vs. community property
- Valuing any businesses involved
- Calculating the income of the parties that is available for support
- Identifying hidden dealings and/or undisclosed assets
- Reconstructing financial records so they are laid out clearly
- Evaluating financial items such as investments, retirement accounts, and stock options
- Reviewing tax returns and financial statements to gain an understanding of the financial picture of the marital estate, and find and track down any inconsistencies (could lead to undisclosed assets).
Their job is to turn complicated financial structures into a clear, understandable financial narrative for both the parties and the court.
Forensic Accountant vs. Traditional CPA: What’s the Difference?
A traditional CPA plays an important role in tax preparation, compliance, and financial planning. Their focus is forward-looking and compliance based. A forensic accountant, by contrast, is trained to investigate. They look beyond the numbers on the surface and will scour your records for fraud, trace money transfers across multiple accounts and jurisdictions, and find the actual cash flow of a business, among many other things. Their mission is not simply to prepare accurate financial documents, but to uncover the truth.
Why Forensic Accountants Are Critical in High-Asset California Divorces
In high net worth divorce cases, the marital estate will usually operate with complex financial structures that one spouse (or even both spouses) do not fully understand. Moreover, one spouse may seek to actively obscure that legal picture. A forensic accountant’s work and final report will aid the couple and the court in achieving full financial transparency that typically involves complicated financial structures that one spouse may not fully understand, or that a spouse may actively seek to obscure. The forensic accountant’s expertise is necessary to achieve the full financial transparency mandated by California law.
An area of particular concern to many divorcing individuals is that their spouse is somehow hiding assets or income. Forensic accountants are experienced in tracking down instances where assets may be reported undervalued, or income appears to be delayed (trying to defer bonuses, stock options, etc. until after the date of separation). They can recognize if business expenses have been inflated or fictitious debts created in order to reduce net income available for support. They can also track offshore, or secret bank accounts.
Contact Cardwell Steigerwald Young, LLP
These are just some of the ways a forensic accountant can be invaluable in high net worth divorces. For more information and official legal advice in your own case, contact a San Francisco high net worth attorney with Cardwell Steigerwald Young, LLP.
