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Forensic Accountant
Black’s Law Dictionary tells us that “forensic” means, “Belonging to
courts of justice” (1990, p. 648).A recent term coming into wider use
is forensic accounting, which has been described as the application of financial
expertise to legal disputes and investigations (Bologna, Lindquist &
Bologna, 1995).Consequently, forensic accounting is accounting that
involves litigation. “In such circumstances, accountants may be called on to
provide expert investigations and evidence” (Hussey, 1999, p. 170).According
to Marc A. Siegel (2001), the first step in conducting a forensic investigation
is to gather as many details as possible about the facts of an alleged misappropriation;
however, CPAs must be systematic to guard against "information overload," which
can lead to important factors being overlooked.
 Siegel
offers the following tips for CPAs and others involved in forensic accounting
activities:
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CPAs, investigators and attorneys need to develop
a work plan and pool what they learn about the core facts every day. |
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Forensic consultants should expect their work
to be scrutinized in litigation since it is impossible to know whether a
case will be tried or settled out of court. The lead attorney may consider
at the beginning who on the financial team would make the most suitable
expert witness. |
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Understanding business customs before commencing
a forensic investigation in another country will help an investigating CPA.
Knowing the language is an important asset. |
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A simple but effective way to track the developing
understanding of the normal movements of cash in an organization is to use
a flowchart. Once CPAs know how cash was supposed to move between all the
parties, they can more readily see how the process was circumvented. |
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The final report should clearly show that the
CPA consultants in the investigation exercised objectivity. It should describe
both sides of any issue, and document that the conclusions reached were
based on data to which both sides in the dispute had equal access (Siegel,
2001, p. 45). |
According to William M. Michaelson (1996), the process of locating hidden
assets is one of components of forensic accounting, which he describes as being
a fairly new discipline for CPA firms. Because forensic accounting involves
applying financial facts to legal situations, it is becoming an important litigation
service that practitioners offer to attorneys. However, in order to be effective,
a forensic accountant must command a thorough understanding of the legal process,
its unique language and the rules of evidence used in both federal and state
courts (Michaelson, 1996).
Accountants are uniquely qualified to assist lawyers with searches for
hidden assets in divorce cases in particular because of their knowledge and
experience in financial document analysis, accounting principles and auditing
techniques and our awareness of common schemes to secrete property. In order
to be effective, searchers for hidden assets must analyze numerous financial
documents and specific transactions, reviewing public and private records and
discovering relationships and patterns among the data that indicate the existence
of additional assets.Some of the sources of public records that will help reveal
the business and personal background of someone suspected of hiding assets include
the following:
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Clerk of the courts, for all lawsuits and judgments
involving the spouse. |
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Department of Motor Vehicles for automobile
and boat registration. |
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Federal Aviation Administration for airplane
registration and pilot records. |
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Tax assessor for property registered in the
spouse's name. |
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Departments of state for business entities in
which the spouse is involved and associates connected to those businesses. |
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Voter registration records. |
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Uniform Commercial Code filings with the state.
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Securities and Exchange Commission for public
filings and entities in which the spouse is involved. |
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Professional licensing authorities (Michaelson,
1996). |
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