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Divorce is one of the most difficult and most complicated times in the life of any person. No matter the circumstances, it will almost certainly be highly stressful for every party involved — including both spouses, and even their legal teams.
This is never more true than during non-cooperative divorce proceedings. In the event that either, or one of the divorcing parties is not willing to play ball with the other, and is dragging their heels, making unreasonable demands, or is attempting to hide anything from the other party, it is crucial that the issue be resolved as soon as possible.
It is vital in divorce that everything is considered, no stone is left unturned, and every base is covered. This need for certainty and precision can be highly difficult, no matter how experienced the lawyers on the case are.
In a circumstance such as this, perhaps the wisest thing to do would be for either or both parties to consider contacting an independent expert, a forensic accountant to enter into the situation and provide their expert assistance.
Forensic accountants are regularly instructed to assist in divorce proceedings, particularly highly complicated ones, but why? Exactly what does a forensic accountant do in divorce proceedings?
In this blog we will detail what a forensic accountant does, how they can help with a divorce, no matter how complicated; why you need one, how much you can expect to pay to instruct one, and much more.
Forensic Accounting Definition
Forensic accounting is the process of conducting a thorough examination into the finances of a person or business. Unlike a standard investigation, forensic accountants will utilise a wide range of skills — including auditing, accounting, and investigation skills to look beyond the numbers and come to the best solution for all parties.
Forensic accounting is common with any issues that are likely to be brought before a court. This is because part of the skillset of a forensic accountant is to be able to present their sometimes complicated findings in the most simple and widely understandable format possible — vital in a court case.
The primary uses of a forensic accountant come in supporting a litigation or investigation. Their unique attributes are perfectly suited to assisting in resolving any disputes, ideally before court is necessary, and can be invaluable in all manner of investigations into issues such as fraud or theft.
A forensic accountant has all the skills required to provide expert evidence regarding the financial aspects of any case. They can be vital in a variety of different legal proceedings involving but not limited to any of the following:
- Commercial Disputes
- Financial Crime
- Financial Loss
- Forensic Insolvency
- Personal Injury
- Proceeds of Crime Act (POCA)
It is extremely common for a forensic accountant to be instructed during a divorce. During such complicated proceedings, honesty is key. A forensic accountant has the skills necessary to enter the situation, assess each and every aspect, and ensure that both sides are acting appropriately.
How Forensic Accounting Helps with Divorce
Forensic Accountants often have a key role in divorce proceedings. They can act on behalf of either a singular entity, or as a single joint expert (SJE), representing both sides. It is common for a forensic accountant to be instructed to carry out an in-depth investigation into the proceedings. In divorce, honesty is key, a forensic accountant ensures transparency throughout.
When any marriage breaks down, it is always preferred for a mutually agreed and beneficial settlement to be agreed rather than for the courts to be required. However, unfortunately, this is not always possible and a forensic accountant is needed.
It is increasingly common that during proceedings, the division of assets comes up time and time again as an issue. If the divorce is not wholly amicable on both sides, then it is possible for tensions to rise — when one or either party feels particularly upset or aggrieved, then they will often be less likely to totally cooperate.
Additionally, it is not uncommon for one spouse to be responsible for the primary management of both parties’ finances. In this common scenario, should the couple divorce, then one party holds a significant advantage over the other due to having a more clear understanding over how much and where all their shared funds are.
Your forensic accountant will be capable of guaranteeing total and assured financial transparency in your divorce. They will do this by investigating both parties’ finances — with the explicit aim of identifying, should any exist, financial irregularities and discrepancies.
Ultimately, a forensic accountant will help with your divorce proceedings by ensuring that everything goes through as efficiently and transparently as possible. Despite being instructed by the parties involved in the divorce, a forensic accountant’s responsibility will, in the end, lie with the courts — meaning that they will demonstrate independence at all times and act as an outside expert seeking to do the correct thing in the eyes of the law.
What Does a Forensic Accountant Do in Divorce?
Since finances are one of the most common points of contention in any divorce proceedings, the expertise that a forensic accountant can bring will be invaluable in ensuring everything goes smoothly. Forensic accounting assists with asset and business valuation, asset tracing, assessing tax implications and much more besides.
The role of a forensic accountant in divorce will cover all bases to make sure that the best, most honest outcome is guaranteed. Their duties include:
Ensuring Smoothness Throughout
The divorce process is highly complicated and can come with all manner of potential stumbling blocks waiting to trip you up if you are not careful.
Add in the fact that divorce is one of the most stressful things a person can go through, unnecessarily stretching it out due to poor planning, badly filed paperwork, etc. will do nothing but pile additional stresses (both emotional and financial) onto the situation.
Instructing a dedicated forensic accountant to oversee the proceedings early can be key in ensuring that everything goes as smoothly as possible, to help you avoid all the possible stumbling blocks to ensure the process is as efficient, fair, and cost effective as possible.
In order to ensure that the distribution of assets is fair for both parties, all assets on both sides will need to be evaluated during the proceedings — this includes property, investments, and even things like businesses.
The role of a forensic accountant during asset valuation is to ensure that the value of your assets is as accurate as is possible.
Working out a fair valuation for a high-value asset like a business that both parties can agree with is one of the most difficult jobs a forensic accountant can be faced with.
Valuing a business, particularly during a high-stress situation like a divorce, is a highly complex and intricate process, one that requires a great deal of precision and accuracy.
There are multiple methods of valuing a business during a divorce, including:
- Valuation based on assets
- Considering data like cash flow, gross income, history of debt, etc.
- Sale price of similarly positioned companies within the industry
- Projections of future earnings
Additionally, a forensic accountant can also be on hand to provide their expert guidance should a business valuation ever be disputed for any reason. They should be able to advise you on the key next steps to make to ensure you ultimately get the best, fairest result.
An unfortunate reality of divorce is that sometimes — particularly during a particularly acrimonious breakup — a spouse may make the decision to conceal some assets. Ultimately, hidden assets cannot be shared fairly. Tracing hidden assets stands out as a speciality of a forensic accountant.
There are often three main ways of tracing hidden assets. These are:
Identifying Net Worth
Forensic accountants will analyse information and statistics from financial documents and banks to get a clear picture of their financial situation. They will particularly look at how much the person was worth before the divorce proceedings began and compare it to how much they say they are worth now. If something seems awry with the results, it could be a clear indication that the individual is trying to conceal their assets.
Another way to identify whether assets are being hidden is by looking at the net deposits made by an individual and adding it to any payments they have made. Transactions between known and declared sources are then discounted from the investigation. Anything left over is then pursued further to find out where the money went.
Understanding the Parties’ Funds
The final way a forensic accountant can identify hidden assets is by taking a deep dive into both parties’ funds, to determine whether any money has been spent that hadn’t been declared previously. This is done by analysing bank statements and other financial data.
Common methods of concealing assets include transferring them to a secret account, giving them to friends/family temporarily, exaggerating liabilities, shell companies can be created with the purpose of storing and using funds during the divorce, and more.
The most effective way of uncovering hidden assets is to investigate the suspicious party — examine their tax returns, assess their spending patterns, their correspondence, etc. in order to attempt to uncover any potential discrepancies between what they are reporting and reality.
If you believe that your spouse may be hiding assets/funds from you, it is vital that you contact a forensic accountant as soon as possible. It can be incredibly difficult to evenly split assets late in the proceedings, even if the dishonesty comes to light. The earlier you find the discrepancy the better odds of fair distribution.
It is a sad reality of divorce that often, there is a child stuck in the middle, further complicating the situation. Unfortunately, it is not wholly uncommon that when deciding on the future care of the shared child, for the parent with the higher income to underreport their income. This is done to attempt to minimise their future child support payments.
Forensic accountancy services can be ideal in helping to determine both parties actual income, including any possible hidden assets, to ensure that spousal/child support payments may be calculated properly and all children stuck in the middle of difficult positions will be properly taken care of no matter what.
Identify Joint Assets and Liabilities
During a marriage, it is widely common for one person to handle the finances, while the other party is responsible for other day-to-day activities. While this sharing of duties may be ideal during marriage, it can make the process of a divorce highly complicated.
If the party responsible for the finances is aware that divorce could be imminent, or if they are the one wishing to divorce, they may use their role to benefit themselves by hiding assets to gain a more favourable settlement for themselves.
Forensic accountants can examine all shared assets and liabilities to make sure that all affairs are in order and as they should be.
Something that some couples may not totally consider when considering a divorce is the impact tax can have on shared finances during the division of funds/assets.
Poor financial planning can lead to huge sums of money ending up in the hands of HMRC. A forensic accountant will have all the expertise needed to allow you to prepare, and minimise the implications tax will have on your transfer of assets.
Due to recent changes to Capital Gains Tax (period to sell interests reduced from 18 to 6 months), CGT is potentially the most impactful form of taxation that can hit hardest if you are not careful and do not plan accordingly.
Should the circumstances of the divorce ever reach the point where a court date is required, a forensic accountant will also be able to act as an expert witness.
Presenting their findings in a court of law is a common duty for a forensic accountant due to their excellent ability to get their points across to the courtroom, judge, and the jury as clearly as possible — presenting it in a format that anybody can understand.
A forensic accountant expert witness can act to ensure that the best and fairest possible outcome for both parties is reached.
Why Do You Need a Forensic Accountant for Divorce?
As mentioned above, a forensic accountant is vital in a divorce whenever there is any suspected foul play going on from either party — particularly if one party thinks the other is hiding assets. However, there are other important reasons instructing a forensic accountant to assist in your divorce is a good idea besides just to locate hidden funds.
Your forensic accountant can also assist with:
- High-value divorces/divorces with lots of assets
- Financially complex proceedings
- Any conflicts (over division of funds, regarding property etc.)
- Cases where either party owns a business individually
- Cases where you co-own a company together
Additionally, divorce proceedings will be littered with all manner of different complicated and word-heavy documents that can take hours and days to review. These documents can be vital in revealing key information to ensure parity throughout the process.
A forensic accountant relishes the combing over and analysis of such vital documents. A huge part of the forensic accounting job is looking over paperwork like tax returns, financial and bank statements, sales invoices, financial projections, mortgage applications and documentations, and more.
Put simply, the main reason you need a forensic accountant is to ensure total parity and transparency between both sides of the table throughout proceedings. From hidden assets to working out child support and beyond, a forensic accountant can be key to saving you money, time, and a great deal of stress.
Do Both Parties Need a Forensic Accountant?
It is a common misconception that both parties need their own individual forensic accountants. It is possible, particularly in the more mutual scenarios, for a forensic accountant to act as Single Joint Expert (SJE). A SJE will benefit both parties in divorce proceedings and ensure a more co-operative, and hopefully smoother process.
However, for less co-operative, more acrimonious circumstances, either or both sides may see fit to contact a forensic accountant of their own to act as a party-appointed adviser or expert witness.
Can I Instruct a Forensic Accountant Once a Divorce is Finalised?
It is possible to seek the assistance of a forensic accountant after the final distribution of assets has taken place. For example, evidence may come to light after the divorce has been settled that one party has concealed some assets or they were not completely honest about the true value of their business interests.
Should this situation arise, a forensic accountant will be able to perform an investigation to see if any more money can be claimed. However, this is likely to be extremely time-consuming and be met with great resistance by the opposing party. As a result, it is always best to contact a forensic accountant at your earliest opportunity so you can have complete peace of mind.
How Much Does a Forensic Accountant Cost for Divorce?
Ultimately, the price of instructing a forensic accountant to assist with your divorce will depend on a variety of different factors. For example, the timing that you bring the accountant in will naturally impact the price, likewise the experience, and level of service will also have a knock-on effect to the overall cost involved.
Additionally, should the forensic accountant be acting on behalf of both parties as a single joint expert then the cost will be split. In the end though, a high quality, experienced forensic accountant should be more than capable of adapting their service to suit the needs and requirements of their clients.
For additional information on the cost of instructing a forensic accountant, it would be wise to get in touch as soon as possible. At Inquesta, we put our clients at the forefront of everything we do — you can rest assured that we would never inflate the price of our services, we merely want what is best for you and that is reflected in our price, and what we offer.
How Inquesta Can Help with Divorce Proceedings
Divorce proceedings are one of the most complex and difficult times in any person’s life. The emotional weight of such a tough time will likely be felt for years and years to come. The last thing you want then is to also be feeling the financial effects of the proceedings unnecessarily. Nor will you wish to remember how slapdash and unprepared everything was, how your former spouse managed to get away with misappropriated funds, etc.
The issues associated with a divorce can often be some of the most complex around and will require the unique services of an experienced, dedicated, and knowledgeable financial expert.
Inquesta have a specialist team of forensic accountants on hand at all times that are perfectly placed to assist in your divorce proceedings — to ensure that everything goes as smoothly, as stress-free, and as efficiently as is possible.
Our team is equally as adept at tracking assets as they are at working alongside your current attorneys. They can locate, identify, and assess any hidden assets or income that the other party has neglected to disclose during the proceedings for any reason.
We can also guide you towards a fair conclusion to any dispute that may occur as a result of issues stemming from business valuation, childcare support, and more.
The specialist forensic accountants at Inquesta are available at a moments notice to be instructed to your case — either as a single joint expert assisting both parties, as a party-appointed expert, or as an expert witness during a court case — we promise to leave absolutely no stone unturned during our investigation in the pursuit of the best conclusion possible, and we are as committed to achieving the best possible result for our clients as we are in ensuring them the best possible service.
In addition, we have considerable experience in acting as an expert witness in court. Indeed, our involvement in a case has often been instrumental in securing a positive result for our client. Because we’ve been in the industry for so long, we’ve cultivated a strong reputation for excellence.
The Inquesta team specialise in providing an unmatched forensic accountancy service. No matter your issue — from divorce and matrimonial dispute to fraud and financial losses — you can rely on us to assist. Contact our team, or request a free consultation today to find out more about how we can help you.