The 3 W's of Engaging a Forensic Accountant: Why, When, and Who

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Author: Robert J. Rufus
Date: Fall 2018
From: American Journal of Family Law(Vol. 32, Issue 3)
Publisher: Aspen Publishers, Inc.
Document Type: Article
Length: 3,138 words
Lexile Measure: 1270L

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It was 10 days and counting to April 15... and a much-needed break. I received an email at 3:20 p.m. on a Thursday (10 days before the tax filing deadline) from a local attorney (Jenny) marked URGENT, requesting a phone call ASAP. I made the call later that evening, explaining that I was in the final throes of tax season; I proposed a meeting for the last week in April. Jenny said the matter was urgent and requested a meeting the next day at 7:00 a.m. She agreed to forward a copy of the Petition for a conflicts check but preferred not to discuss the urgent nature or specifics of the case over the phone.

Jenny arrived at the meeting with her client (Ronda) and a small collection of records. After introductions, Jenny said that she had never engaged a "forensic accountant" per se, but routinely worked with CPAs. I gladly explained the nature of our work (as forensic accountants) and fee structure, including the need for a retainer. We then settled in to discuss the specifics of the case, described by Jenny as follows:

* This is a 7-year marriage; Ronda is a stay-at-home mother with two children (twin boys, age 5).

* The final hearing is scheduled for May 5 (less than 30 days).

* The Judge denied her last motion to continue (although two prior continuances had been granted).

* Primary marital assets include the marital residence, the husband's retirement, and his 50% interests in three family owned and operated franchised auto dealerships (Honda, Volkswagen, and Ford), consolidated and reported as one company.

* During discovery, she had secured a copy of the company's restrictive stock agreement (which included a valuation formula in the event of divorce) and two years of corporate income tax returns (1120S).

* She had taken the husband's deposition. In general, he seemed unknowing and directed her to speak with the company's CFO and his personal CPA. Both had refused to talk to her without a waiver signed by the husband, which had not been provided.

* The husband had engaged a CPA to value his 50% interest in the company, who applied the formula mandated in the agreement. The CPA was also offering testimony that the husband's interest was nonmarital.

* She believed the restrictive agreement was controlling, although the valuation formula seemed self-serving. She had not analyzed or considered the company's tax returns.

* Although the values calculated by the CPA seemed low, she knew the CPA and considered her to be honest and objective. She had not taken the CPA's deposition.

* She believed the only real issues were child support and alimony.

Ronda stated that, although she knew little about the family assets and liabilities (husband paid the bills), she knew that two of the dealerships had been purchased within the last 5 years with a bank loan (which "they all had to sign"). Further, Ronda believed that he was hiding money and they (his family) were playing games with the company's books.

Jenny then proposed that I be...

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Gale Document Number: GALE|A555588860