In divorce proceedings and certain types of commercial litigation, counsel may suspect that the opposing side has hidden some assets. A forensic accountant can be of great assistance in formulating discovery information requests and conducting the analysis that will aid in the identification and location of potentially hidden assets.
In order to identify hidden personal and/or business assets, counsel must address his/her discovery requests not just to the known (items identified on the tax return, items of which his/her client is aware, etc.) but also to the potentially unknown.
Upon receipt of this information, the forensic accountant will perform analyses and asset searches that may identify or point to the potential existence of such items as:
- Income or other payments received that have not been deposited to known accounts.
- Funds deposited for which there is no documentation as to the source of the funds.
- Funds withdrawn for which there is no documentation as to where the funds went.
- Direct wire transfers made to or from unknown accounts.
- Unusual activity involving the safe deposit box (this could be indicative of cash or other assets being placed in or removed from the box).
- The existence of previously unknown off-shore bank accounts, or investment accounts or other assets.
- The substitution of lower value assets for higher value assets (for example, substituting an inexpensive work of art for an expensive work of art)
- The proceeds of expense reimbursements, loans or advances or other non-payroll payments from the spouse’s company.
- The existence of off-balance sheet accounts.
- The existence of intangible assets with a value in excess of the book value.
- The existence of fixed assets with a value in excess of the book value.
- Transactions with related parties (this may be indicative of non-arm’s length transactions that could have been used to reduce the value of the company).
- Unusual company transactions with third parties (this could be indicative of attempts to reduce the value of the company by transferring funds or assets to third parties).
- Hidden insurance policies for which the defendant is the beneficiary.
- Trusts for which the defendant is a beneficiary.
Because each divorce or commercial litigation matter has its own particular set of circumstances, it is critical that the review of the discovery request between counsel and the forensic accountant occur as early as possible in the discovery process. The forensic accountant can help identify specific documents that should be included in the discovery request. This will allow the forensic accountant to conduct thorough analysis asset searches to identify or point to the existence of such assets.
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