Litigation Support: Utilizing Financial Analysis to Find the Story Behind the Numbers

Mark A. Buckberg, CPA, CFE, CFF, Principal

Finding fraud and substantiating a legal case often involve retracing a complex web of transactions and accounts. There are many sources of financial data that can be analyzed to uncover embezzlement, corruption, and financial statement fraud in white collar crime cases, and also substantiate claims of asset misappropriation in divorce cases.

Early involvement of a forensic accountant can be crucial to gathering the financial information necessary to reveal critical evidence. For effective discovery, your case may or may not need the following documents:

  • Tax Returns. Returns can provide information regarding other lines of income, additional properties, related companies and other helpful financial details.
  • Financial Statements. A trained eye knows where to look for falsifications in financial statements and can begin to unravel potential fraud schemes.
  • Accounts Payable/Receivable Records. If occupational fraud is suspected, reviewing these records can provide evidence of fictitious vendors, check fraud, and other common types of asset misappropriation.
  • Payroll Files. Fraud is often committed through the creation of ghost (fake) employees. Depending on the case and your client’s business structure, these records can be key.

Asset misappropriation can be extremely difficult to trace; a thorough review of these and other documents, as well as the potential connections between them, may be necessary. Tracing activity through multiple accounts, verifying accuracy, and reviewing small irregularities requires expert forensic knowledge of financial best practices and rigorous, thorough investigational skills.

In addition, e-Discovery is often a helpful complement to the discovery and review of financial data. Computer forensic examiners can find previously deleted e-mails and files that corroborate evidence gleaned in the analysis of the requested financial documents.

Once the proper financial data is collected and analyzed, the evidence gathered may help you to settle your case, and may actually speed up the settlement process for both business and divorce cases. If your case goes to trial, it is important to note that not all forensic accountants are qualified to testify as an expert witness. When working with a financial specialist for the discovery and interpretation phases of your case, ensure that he/she has the proper qualifications or the testimony will not be allowed in court.

A well-trained forensic accountant, particularly a Certified Fraud Examiner, can be a huge asset in a trial. This professional can clearly explain and clarify complex financial concepts and transactions to a broad audience. Additionally, if opposing counsel has employed a financial expert, if properly qualified, the forensic accountant you chose can review reports for accuracy and provide an objective second opinion.

When financial data is involved, proper analysis of the data is essential to accurately determine the facts. This analysis requires not only knowledge of financial forms and best practices, but an in-depth understanding of the financial issues that can point to larger fraud schemes and misappropriation. Ensure your discovery process encompasses all the necessary documents, and that a thorough investigation of the data is undertaken by a trained forensic professional for the complete story behind the numbers.

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