For many attorneys, retaining the services of a Forensic CPA can play a fundamental role in successfully resolving their clients’ legal disputes. A forensic accountant should possess the unique skills and abilities necessary to assist attorneys and their clients in litigation involving complex financial matters. The need for forensic accountants as expert witnesses and consultants arises from financial issues requiring highly specialized knowledge across a variety of disciplines. Often, these key issues are pertinent to the outcome of the case. Forensic accountants are able to provide a variety of services to attorneys and clients that range from consulting engagements and preparation of financial analyses, to assistance in settlement negotiations and expert witness testimony. While the spectrum of practice areas, specializations and industries is broad, a growing and highly focused segment of forensic accounting is divorce engagements and other family law matters.
According to the latest National Survey of Family Growth, conducted by the Center for Disease Control and Prevention’s National Center for Health Statistics, about half of first marriages in the United States end in divorce. The rate of divorce for subsequent marriages is even higher. While some marriages dissolve peacefully, with each spouse agreeing on a settlement, some do not. In these cases, hiring a forensic accountant to assist in the financial analysis of the estate is sometimes necessary to achieve an optimal resolution on disputed issues.
CPAs have certain roles and responsibilities in engagements involving family law matters. The CPA must maintain objectivity and independence, as an unbiased opinion is in the best interest of both the client and the Court. The CPA must maintain objectivity throughout the pendency of the case. One major distinction between the role of the attorney and the role of the CPA is that attorneys advocate for their clients and CPAs advocate for their professional opinions.
There are two major roles the CPA can play in litigation involving divorce and family law matters, the consultant and the expert witness. In a consulting role, the CPA is engaged to provide advice on the financial issues of the case. The CPA may be asked to evaluate the strengths and weaknesses of the financial matters and provide best-case/worst-case scenarios to assist the attorney in evaluating their client’s exposure. Often, the CPA assists the attorney in developing an overall strategy for the case. Typically in a consulting role, the CPA’s work product is protected by attorney-client privilege and not subject to discovery (a means of obtaining evidence from the other party to a lawsuit).
Another role CPAs play in family law engagements is that of an expert witness. In the role of an expert witness, CPAs may perform similar duties as those performed in a consulting role but may also be required to testify in depositions or trial, where the CPA will support their work-product, conclusions and opinions. When a CPA is hired as an expert witness, all work-product is typically discoverable. In some cases, a CPA may initially be engaged in a consulting role that eventually transitions into testifying as an expert witness. In these cases, work product performed as the consultant becomes discoverable once the CPA assumes a testifying expert witness role.
A CPA engaged in divorce engagements and family law matters often performs specific detailed analyses, prepares exhibits and forensic reports, attends depositions of the parties and/or witnesses, attends hearings, mediations and conferences, and testifies as an expert witness under deposition and/or trial. Whether hired as a consultant or expert witness, an important role the forensic CPA plays is translating complex financial information into a form that is better able to be understood by those who may lack advanced financial literacy.
A CPA’s role in divorce engagements and family law matters often consists of:
- Assisting with the collection of financial information and the discovery process
- Reviewing financial information for accuracy and reasonableness
- Preparing various financial forms required by the Court
- Calculating the parties’ incomes and expenses
- Locating hidden assets
- Calculating unreported or underreported income
- Assisting in the equitable division of the parties’ assets and liabilities
- Preparing alimony and child support calculations
- Determining the value of closely held businesses
- Identifying and valuing marital and non-marital property
Other types of litigation cases that often enlist the services of a forensic accountant include shareholder disputes, lost profits and damages calculations, breach of contract, fraud investigations, white-collar crime and bankruptcy. Due to the nuances and unique circumstances of each case, the forensic accountant’s role can vary with each engagement and often changes through the pendency of the case. No matter the type of litigation, the forensic accountant is often a vital member of the litigation team. Attorneys are often able to obtain significant leverage in settlement negotiations as well as in the courtroom by communicating and quantifying complex financial data in a clear and concise manner that is easily understood. A skilled forensic accountant is a value added member of any litigation team when complex financial issues play a key role.
Amanda M. Porupski, CPA
Forensic Financial Services/Litigation Support
CBIZ MHM, LLC – Tampa Bay
Casey E. Copen, Ph.D, Kimberly Daniels, Ph.D, Jonathan Vespa, Ph.D, and William D. Mosher, Ph.D. “First Marriages in the United States: Data From the 2006-2010 National Survey of Family Growth.” National Health Statistics Reports 49 (2012): 1-22. Web. http://www.cdc.gov/nchs/data/nhsr/nhsr049.pdf.
AICPA. “A CPA’s Guide to Family Law Services.” Forensic & Valuation Services Practice Aid (2013): 1-16. Web.
AICPA. “Serving as an Expert Witness or Consultant.” Forensic & Valuation Services Practice Aid (2014): 1-80. Web.