Hi Everyone,

After seven years of trying to recover our marriage, we are now going through a messy divorce. I've posted this question over in "Divorce" but thought maybe I'd get more response here.

My attorney is pressuring me to hire a forensic accountant and I'm trying to evaluate if it's worth the money. The man she wants to hire is very expensive. My husband has had a business for the past fourteen years and I'm currently a stay at home mom.

I've already had two CPA's give a very quick assessment and review of the corporate and individual taxes. They both thought things looked pretty legit. They also both gave me the same numbers as far as what seemed a fair settlement. So, with that knowledge, I'm wondering if it's worth spending thousands more on a forensic guy.

I appreciate any input on this.

Leah2B,

I am a tax attorney. My undergrad was in accounting. Without seeing the documents that your attorney and CPA(s) looked at I still think you may be better off hiring the forensic guy/girl because you just don't know what they'll find. The CPA's you had give a cursory review have NO IDEA what is behind the numbers without looking into it...much deeper.

There are some trade off factors you should consider.

1. How much money are we talking about??? I don't need you to answer me here but think of it this way, if the Forensic Accountant can demonstrate that your X has fudged the books by 4%...how does that 4% compare to the cost of the forensic accountant. Is it worth it?. Don't forget also...if forensic accountant can PROVE some discrepancies, the judge MAY just disregard the books entirely and award you say 10% more because he doesn't trust XH's given numbers after your attorney RIPS him apart on the stand.

2. If you can catch XH lieing to the IRS the mere threat of exposure or reporting him to the IRS may facilate you receiving a quite favorable settlement. Ex-Wives are the number 1 or 2 source of information to the IRS fraud division.

3. If your husband has had years to prepare financially for the liklihood of divorce from you AND his net income has gone down whereas gross sales for the company are up or even...then no doubt...hire the guy/girl.

4. You've only got 1 shot to do this right. Even if you don't find anything the money is well spent as you will be able to walk away without concern or skepticism that you got ripped AGAIN. I say..avoid the chance of regret.

5. Trust the professional. You wouldn't buy a house without a proper inspection. Your "contractor buddy" may be able and willing to give you a decent walk-thru-look-see, but a trained and certified home inspector is the only one that's gonna climb through that crawl space under the home and discover the plumbing leak and cess-pool of waste there.

If you want to email ME the numbers and discuss this further I'd be happy to assist you. Again, I am no substitute for a professional forensic accountant but I am willing to give it a look-see myself...off the boards, of course. My wife and I share the email listed below.

Mr. Wondering

p.s.-price out your own forensic accountant. If you hire the guy recommended by your attorney, your attorney may be receiving a "commision" or "referral fee". You may save money getting your own. At least ask your attorney whether he/she will receive any fee if you hire his/her forensic accountant...if so, wait a few days, price out other ones then call your attorney and ask her/him to split the referral fee IF you hire his/her guy. It's better than nothing.

Leah2b

I am a CPA and have done "forensic" work. This depends on what type of games your H played with the books. Did you guys live better than was recorded? Did he? Also, it depends on how much money / worth we're talking about. 4% of 1 million is much different than 4% of 100,000!!

Also, if there are significant accounting issues you can certainly demand that he pay for forensic exam, or at a minumum split the cost. If there are ANY questions here then do it! We ALWAYS find something!

Best wishes during this difficult time!!

Thank you Send Me and Mr. Wondering,

You both have been so helpful in your thought provoking questions and comments. I truly appreciate your input. You both made excellent points that make me feel that this might very well be a worthwhile investment.

Mr. Wondering, I'm so glad you mentioned the fee that the attorney might be earning. That would make sense, as she is wanting this particular man that is over two hours away from our business. One would think there should be some credible accountants here.

Also, you mentioned a discrepancy as far as gross sales going up and income going down. That is the case here. The business was doing well enough before the split that H had actually been pre-approved for a million dollar loan for business expansion. Yet, out income was lower than when he supposedly wasn't doing as well.

So, SEND ME, we are talking a bigger chunk of change.

Thanks again to both of you for your helpful comments. This was exactly the input I was hoping for. God bless both of you in your situations.

Wow! This is great advice you are getting here!

I have one question though. I don’t know what the law is like in the USA but in Europe this would be a consideration: Husband and wife file a joint tax report by default. So IF H has been fiddling around with the numbers in a way that could lead to the Tax Authorities to reassess taxes both parties would be held accountable in solidum. So a possible fine would not be split 50/50 but would be paid by the one with the easier to access assets. This would be done irrespective of wife knowledge or lack of knowledge of the illegal activity.

The argument behind this is that since H and W file jointly both are enjoying the benefits from the unreported income – therefore both pay the fine.

I would really like to hear from the above posters whether this would have to be considered.

Having pointed this out and even if it were a consideration I would seriously consider going through with the forensic accountant. If there is anything fishy going on then H will most likely offer a better settlement simply to keep the secrets covered.

bigger- Mr W would be better served to comment on that. I am not a tax accountant but an auditor/ generalist / IT type. However, here in US there is a provision in the code for "spousal relief" for such cases. Generally a stay at home mom does not have knowledge of business and totally relies on spouse for income and accounting for the business.

I did think above tax implications when I answered and if there is a significant issue with reported income then the court MAY notify the IRS. The IRS could look at tax records based on public record of court case. Husband could and may be smart to "settle" before forensic becomes involved....who knows answer to that.

Having access to million $ may be based on "assets" of company, which you're entitled to. If it is based on income that is even better. Certain types of credit are very relaxed now and easy to get....I would not that be the reason why you hire forensic. If teh business has sizable income, has allowed for a well off living style I would say it is worth it. However, any CPA firm would have someone with the same credentials as one your attorney wanted to hire.....

Also I am not sure what it is in the states, but a stay at home mom here - unless she is pulling in an income, does not file at all...her husband files her as one of his dependents...You only file up here if you are pulling an income. Some men pay their wives up here for tax write off purposes...others claim the dependency...not sure if it's the same in the us?

Hi Leah,

Over a year ago I recommended the same thing to you because of H's secrecy about finances and how you were denied any involvement at all in the financial decisions of your marriage. He's always "meted" out the little pittance you were allowed to spend and you've never seen a real accounting of your financial picture or gotten honesty from him in this regard. I think strongly that this will be money well spent. hugs chere!!

in light of star*fish's information.....

I concur.....spend the money....and then make him pay for it

Leah2be,

I am a tax accountant but deal with international issues, not U.S.. My WH has a business, which is a long story I won't go into other than to say he started it with emotional support from his OW (he deserves this, according to her). One of my biggest mistakes was not hiring a professional to value the business before he bought it, with his retirement money and a home equity loan on our house, amoung other things. He bought it from his BF, the business was/is not worth what he paid for it. At the time, I was too emotional, having just found out about his A. He created the typical A atmosphere where everything was my fault, I had very low self esteem during this period. Suffice to say, now that the BS fog has lifted from my brain, I really regret not getting professional input on this.

I agree with the others, especially since you are not involved in his business, spend the money, get the advice. You will not regret it.

Thanks so much to all of you!!!

BIGGER- You posed a great question. One that I've wondered about myself. I think everything has been on the up and up. But then again, I thought that too about other things in our marriage. <img src="/ubbt/images/graemlins/smirk.gif" alt="" />

SEND ME- Referring to your last sentence...

"However any CPA firm would have someone with the same credentials as one your attorney wanted to hire"

Do you feel there would be much difference between a forensic accountant and a regular CPA? Would it be worth investing the extra money for a forensic accountant? Thanks for your help!

NOBOHIO and DORRY-

Thanks for your comments. Nobohio, I understand the A atmoshere all too well. I'm trying to keep my wits about me on this one. Sometimes everything in me longs to just give it up to have peace and to get it over with. But then sanity prevails again. My friends and family keep reminding me that even if I give into H, I won't necessarily have any peace. Life with him will never be easy. Thanks again for writing.

STARFISH,

Hi there! I'm so happy to hear from you. I was wondering if you were still around. I often think of you and wonder how you are doing. Are you currently a life coach? Thanks for checking in.

SEND ME is saying many CPA firms have CPA's experienced as Forensic Accountants. They are NOT that rare. Be smart. Price them out. Ask friends for a referral. If the numbers are big enough, do not shy away from paying for the more expensive one. Maybe get 5 quotes and pick the middle one. You don't want a cursory review...you want a detailed analysis.

Someone asked about spousal IRS liability. In the US we have the "innocent spouse" defense. It is a little convuluted but you can go to the IRS website and read about it should your forensic accountant find some fraud. Most likely, you won't report it or reveal it to the court as you'll use the "fraud" to extract a favorable settlement before any trial. However, should you have to follow through with the implied threat (you can't extort a settlemeent..."pay me or I'll report you" is illegal in and of itself)...you'll most likely be protected from IRS collection by the "innocent spouse" defense.

Another big problem with actually reporting a spouse to the IRS is the fact that after you report them the ensuing IRS involvement results in their inability to pay you off on the marital settlement. Assets get frozen, businesses close, money is GONE. Some spouse's make a huge error in judgment when vindictively attempting to destroy their soon to be ex-spouses. Something to be mindful of as the court will likely order him to pay you your marital settlement over time. Rarely, very rarely, do businesses have the liquidity to pay off the spouse in a lump sum.

Mr. Wondering

Mr W...I concur on all issues addressed.

Forensic accounting is just a deeper form of an audit. Things that make a business worth more and that would be found out by a forensic accountant (auditor) include : personal expenses run through the company...and can usually be huge..these include documenting all travel...all purchases. It would also disclose all withdrawals from teh company that you have never seen, possible other businesses he owns that he is diverting funds to....all sorts of things....all I would need is the checkbook, bank statements and financial statements to start digging...if its automated that is great (saves money on examination)...if it is a manual , pen and paper bookkeeping that is very expensive....if they fight the forensic or if they try and settle....it should strengthen your resolve to get it done!!

Good luck, keep us posted...

MR.WONDERING AND SEND ME,

I can't tell you both how very helpful you have been. You have explained more to me in the past day than my attorney has in the past year. When I've asked for an explanation of what the forensic accountant would do, she simply said, "Review records and assess the business worth". She has never explained things in detail as you both have.

Also, I have a question for you. She told me it would be a retaining fee of $3,000 and that it could be anywhere from there to $10,000 to $20,000 or more depending on what he finds. I asked her if I could put a cap on the total. Her response was that she felt that would be unprofessional. Do you agree? Am I suppose to give this man a blank check?

MR. WONDERING- That's funny, I keep wanting to write Mr. Wonderful... Anyhow,thanks for addressing the fraud issue. I truly don't think that's there but even if by some remote chance it is, it's nice to know there is some protection.

You don't have to worry about me being revengeful and trying to put him away. My gift is NOT assertiveness. I'm too heavy on the mercy side of things, always trying to pursue peace and reconcilliation. But, I'm learning to have more of a balanced perspective.

The attorney has been trying to get financial info. from H for over eight months. She finally got my permission to file a motion to compel to get his interrogatories answered. I went to review them yesterday and discovered there are many questions unanswered and many documents that he didn't submit. So, we'll probably have to work months more to get the acct. the needed info. H is really dragging his feet.

This would make one think he has money but then he's pleading poverty. We've met in a four-way twice to try to come up with some type of agreement. He isn't wanting to pay near the amount that the two CPA's thought reasonable. He offered a third of that amount. He also is saying he's unable to pay the monthly support that the judge set in the pendente lite hearing. He's entered a motion to have it reduced. So it's really difficult to discern truth.

You are right about not expecting a settlement up front. There are assets there but they are not liquid. I've told H I would be fine about getting a future settlement. But he still feels I'm ridiculous wanting what I've asked for. He knows how to make me feel very guilty about the whole thing.

Anyhow, please excuse my ramblings. Thanks again for the tremendous assistance you've both offered me! I think you guys deserve the "commision" or "referral fee" for the forensic accountant. <img src="/ubbt/images/graemlins/smile.gif" alt="" />

$10-20k sounds expensive to me. I've never hired one before but I do have a theory about hiring CPA's and Attorneys. If the office is too big, the walls are lined with real wood and the artwork looks expensive AVOID hiring them. The big firm professionals are factories. The partners are "rainmakers" that rarely do much of the legal work themselves. They pass the work off to associates that they force to bill out a tremendous amount of hours...hours that they definitely want to "hit" your file for to the maximum they believe they can procure. Then the partner needs to get his billable hours in on top of that "reviewing" the associates work to ad nauseum.

Point being. Look for an indepentent experience solo practioner and hire him/her yourself to avoid the cost of referral fees. Find out how many divorce cases he's done. Find out if he/she used to work at a firm and has experience looking at a variety of businesses. Find out if the Forensic Accountant is familiar with your husbands type of business.

Good luck,
Mr. Wondering

Thank you once again, Mr. Wondering. Your information has helped me feel so much more knowledgeable and prepared. This has been great! Blessings to you and Mrs. Wondering!

Again, Mr. W is on to something. The fee sounds really high. Find out EXACTLY what it is they will be doing. They must, per AICPA rules give you an engagemnet letter dicating what they will do. The "expensive" part is if they provide a written report because if supplied to the court they will have to "defend" it. So, it is written with great care.

Don't go to some high powered firm because the folks doing the work are newer, less experienced staff. Find out hourly rate. In fact, give me zip code of nearest city and I can look some up for you!!

Best of luck...

Hi Send Me,

Thanks again for being such a tremendous help. Do you have an e-mail address where I could send my zip code so that you could look up that info? Thank you so much!