Lately it’s come to my attention that the use of forensic accounting for high net worth individuals is rapidly on the rise–and is increasingly beneficial those in complex financial situations. So what exactly is forensic accounting, and should you consider following the trend of hiring such a professional?
Technically speaking, forensic accounting is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation.
There are a several different reasons high net worth individuals can benefit from the use of such accountants. Following is an explanation of two of the most prominent:
Questionable business practices
A forensic accountant can address help mediate various business concerns, such as disputes between partners and questions of ethics within the company.
These accountants are trained to examine financial matters within companies in great depth in order to determine fair (or unfair) business practices. Wouldn’t you feel better putting financial business issues in the hands of a professional?
When high net worth individuals divorce, it can be nearly impossible to appropriately divide marital assets if both parties aren’t aware of exactly what those assets are and what they’re worth. For this reason, it’s good idea to hire a forensic accountant.
Think about all the types of assets you own, such as investment portfolios, businesses, collectables, trusts and partnerships. While divorce lawyers are certainly a necessary part of the equation, they won’t be able to accurately assess the value of all your different assets. That’s where a forensic accountant comes in.
Things get especially complicated if you hold assets in trusts or partnership that are located in various states. Add in the value of various retirement accounts, life insurance plans and deferred compensation arrangements, and it’s clear the expertise of a qualified professional is required.
Unfortunately, it’s also common in the event of a divorce for one spouse to attempt to hide certain marital assets from the other spouse. He or she may even start a new corporation in attempts to conceal such funds. Forensic accountants are trained to overturn and examine every possible area where assets could be kept.
They are also experts at figuring out each spouse’s true income. Divorcing spouses sometimes claim to have lower incomes than they actually do in attempts to keep certain funds from one another. Whether it’s off-the-books income, false debt, or hiding funds in another fashion, a forensic accountants will do their best to get to the bottom of the situation. Unlike lawyers, these professionals have the ability to really dissect every investment portfolio, bank balance and tax return to make sure all the numbers add up.
Bottom line: If you’re a high net worth individual, you have a lot at stake in the event of a business dispute or divorce. In these situations, don’t delay doing some research to find a trustworthy forensic accountant that can help ensure a fair and equitable result.