Forensic accountings are the investigative analysis of financial activity that provides a basis for discussion, debate, and ultimately dispute resolution. "Forensic" specifically refers to an investigation to decide questions arising from litigation, and produces evidence suitable for use in a court of law.
A forensic accounting may be required of a person acting as a fiduciary, whether as an attorney-in-fact under a power of attorney, a guardian of the estate, a trustee, or a personal representative in a probate. It may also be required of someone who has been acting in a fiduciary role unofficially, such as assisting another person with financial transactions. The process can be very labor intensive, depending on the quality of record keeping and the level of cooperation from various parties.
The main steps in a forensic accounting are:
Data collection may include subpoenas for financial records - missing statements, documentation on deposits, withdrawals, payments and transfers, and proof of beneficiary designations and changes. Preparation and analysis of the information collected allows the composition of a report that summarizes the financial activity in a way that can be easily presented to parties or the court, allowing a decision to be made concerning the fiduciary's activity.
The accounting may be analyzed by a neutral third party, such as a court-appointed guardian ad litem, CPA or other investigator. It may also be shared privately among the parties to negotiate outside of court or presented as part of alternative dispute resolutions, such as mediation. CBGS can assist clients in the pursuit and analysis of forensic accountings to analyze the activity of a fiduciary, or in preparation of forensic accountings for those who are acting as fiduciaries to others.
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