The decision to hire a Forensic Accountant can be a gamble. Not all possess critical characteristics such as being able to see beyond what is immediately in front of them utilizing a panoramic approach.
Traditionally, a CPA looks at historical data, and focuses on the” fairness” of financial statement presentations and the preparation of tax filings. In contrast, a Forensic Accountant “follows the money” applying “investigative techniques” to historical information that results in a deeper and wider value-added look. Forensic Accountants look at the historical information regarding a matter often asking themselves “what happened before alleged events?”, or “what could have happened without alleged events?
How a Defendant Won the Lottery
During a criminal litigation in South Florida some 15 years ago, a defendant was charged with money laundering by the US Government. The Government alleged that the proceeds of a criminal enterprise were laundered by the defendant through purchasing winning lottery tickets from lottery winners for cash at a discounted price. The actual winners were not reporting their cash payments on their individual tax returns while the defendant reported the ticket winnings in his individual income tax returns.
The Government theory was that the proceeds of the criminal enterprise were the result of the sale of narcotics from a rented vacation home owned by the defendant. The location was rented out to a third party who was engaged in narcotics trafficking. The Government alleged that the defendant was in a business partnership with the renter of the location. The Government further alleged that the sale of narcotics funded the defendant’s purchase of the rented home and other expensive assets. The discovery documents provided by the Government completely omitted the business and personal financial records of the defendant.
A “Lifestyle” analysis reveals what is missing
A complete historical financial analysis of the business and financial records of the defendant as well as an investigation into the source of the funds used by the defendant to acquire the defendant’s home, rented property, other assets, and the defendant’s daily/monthly living expenses was performed. This analysis included a number of years of the filed income tax returns of the defendant, and the defendant’s business for comparison with the defendant’s verifiable cash flow. The analysis and related work product comparison demonstrated that all the defendant’s receipts, disbursements, and asset purchases were the result of legitimate sources of funds derived from the defendant’s business and from confirmable loans from family members and banks. These transactions occurred prior to the year that the defendant reported lottery winnings on his personal tax return. The defendant was found not guilty at his trial.
Without a panoramic in-depth approach, results could be catastrophic for a defendant
The world of forensic accounting is not fuzzy. Its roots are in historical verifiable information. An effective forensic accountant will combine the standards of evidence with the professional principles of Independence, Objectivity, and Integrity. Results that are verifiable, and easily explained to a jury, a judge, an opposing attorney or opposing expert will speak for themselves.
A Forensic Accountant that utilizes a panoramic perspective, simplifies information, stays factual and communicates effectively.
Do not wait to have a Forensic Accountant scrutinize transactions, assess if there is a financial motive, investigate, look for discrepancies, revise financial information, or find clues that can point to hidden wealth or assets.
Get started in order to obtain a favorable result for you individually as well as for your business. ©