6 Questions to Ask a Forensic CPA About a Business-Owning Spouse

In my many years of practice as an expert specializing in matrimonial disputes, there’s little I haven’t seen in the way of business-owning spouses trying to hide assets. From the creative and clever to the downright fraudulent, I suspect that these manipulations and machinations will always exist in some form or fashion.

Here’s a couple that have made my personal “Hall of Shame": 

• One business owner spent hundreds of thousands of dollars on unnecessary equipment and maintenance
• A partner in a small company that sold used automobiles paid his brother more than market price for inventory
• An owner’s girlfriend lived in a house, rent-free, that the owner bought

6 Basic Questions that Will Get to the Root of an Asset Hiding Scheme

Instead of providing a comprehensive list of schemes, I’d like to share six basic questions that can go a long way toward uncovering improper asset hiding or protection strategies in marital disputes.

1. Is the spouse underreporting income and overstating business expenses?
   
2. Does the spouse have a relationship with another person, and is he/she spending or wasting marital assets on that person?
   
3. After separation, is the spouse exhibiting a pattern of purchase activity, like overspending or unnecessary spending on the business that has a clear effect on depressing the value of marital assets?
4. Are family members surreptitiously colluding with the spouse to hide marital assets?
5. Has the spouse properly disclosed and valued intangible marital assets like patents or other intellectual property?
6. Has the spouse properly disclosed, valued and classified stock options and other investments that can be counted as marital assets?

Variations on a Theme ...  

If any of these questions raise even the slightest inkling that your client is being taken advantage of by their spouse when it comes to properly splitting assets, it’s time to call in a forensic accountant. Our work involves peeling back the layers of records, statements, bills, transactions and the like to identify questionable practices or to uncover outright fraud.  

While the spouse’s strategies or tactics for hiding assets may be clever or complicated, they’re all really nothing more than variations around one of the six themes or questions discussed above.  

If you do run across a particularly clever asset hiding scheme however, please let me know.  

There’s always room for another placard in the Hall of Shame!

Need Help?

Our Forensics & Litigation Support Group provides business valuation, litigation support and forensic accounting services to individuals and businesses. We have extensive experience in matrimonial disputes, including serving in expert witness and business valuation roles. Contact us online or call us at 800.899.4623.