ABA SECTION OF FAMILY LAW eNEWSLETTER, JUNE 2012

AICPA CORNER
A Column by Members of the AICPA Forensic and Valuation Services Section

By: Jeffrey F. Gibralter, CPA/ABV/CFF, CFE

In a matrimonial matter, forensic accountants are often called upon to assist with tracing various financial assets to verify or support specific claims or to ensure completeness.  These types of engagements can become very time consuming, and as a result, very costly for the parties.  To help minimize costs and prevent unnecessary delays, it is important for the forensic accountant to request the pertinent documents for the agreed-upon number of years and number of accounts that require analysis.

The documents required depend largely upon the type of asset being analyzed.  The most common assets which require tracing in a matrimonial matter include: personal bank and brokerage accounts, business ownership interests, income and real property.  Certain documents should be requested and carefully reviewed by the forensic accountant, including, but not limited to:

PERSONAL BANK AND BROKERAGE ACCOUNTS

• Personal income tax returns to verify the existence of accounts;
• Personal bank account statements and canceled checks;
• Personal brokerage account statements;
• Other account statements or passbooks (i.e., Certificate of Deposit);
• Personal financial statements;
• Loan and credit applications.

BUSINESS OWNERSHIP INTERESTS

• Personal income tax returns;
• Business tax returns;
• Gift tax returns;
• Forms K-1;
• Shareholder, partnership, and operating agreements;
• Investor reports;
• Offering memorandums or similar information;
• Personal financial statements;
• Loan and credit applications.

INCOME OF NON-OWNER EMPLOYEES AND EXECUTIVES

• Wage statements;
• Forms 1099;
• Commission reports;
• Compensation and benefits summaries (usually prepared in most large corporations and financial institutions for all employees);
• Personal bank and brokerage accounts;
• Personal credit card statements;
• Personal financial statements;
• Loan and credit applications;
• Retirement or deferred benefits statements or summaries.

REAL PROPERTY

• Deeds;
• Closing statements;
• Mortgages;
• Notes and loans;
• Canceled checks;
• Real estate tax bills;
• Bank and brokerage account statements evidencing purchase, payments, and/or sales proceeds.

All of the above mentioned documents should be carefully reviewed by the forensic accountant and cross referenced to identify any potential inconsistencies.  Additional documents may be required if during the analysis, other assets are uncovered.

It is important to make sure that we as forensic accountants work closely with counsel and have frequent communication to ensure the appropriate documents are requested to target our analysis and provide counsel with the information required to settle or litigate their matrimonial matter in a meaningful and time efficient manner.

Jeffrey F. Gibralter, CPA/ABV/CFF, CFE is a senior manager at the forensic accounting and business valuation firm of Klein Liebman & Gresen, LLC (“KLG”).  If you would like to find out more about KLG and our services, please visit our website at www.goKLG.com .