Forensic Analysis
"In our involvement in litigation, forensic analysis or investigative accounting arises routinely, and is common to many, if not nearly all, of our engagements."
Kal Barson, Co-founder
Forensic analysis, in that accounting sense, is akin to investigative accounting. These words mean the accounting analytical process that reviews a volume of transactions for some specific pre-determined purpose.
In our involvement in litigation, forensic analysis or investigative accounting arises routinely, and is common to many, if not nearly all, of our engagements. This process typical involves an analysis, sometimes in great detail, sometimes by sampling, of a substantial volume of data to determine things such as funds flow, real income, lifestyle or standard of living type issues. Also, other related analytical issues such as, for instance, in a divorce or matrimonial matter, the determination of the possible dissipation and/or misuse of marital funds.
Forensic Analysis and Businesses in Litigation
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Commonly, when a business is involved in the litigation process, it is virtually a guarantee that it will be necessary to determine the real income and expenses of the business operation. We have all come to learn over the years that you cannot accept, on its face, the tax return or financial statement of a closely-held business. Rather, numbers often must be reconstructed so as to determine what are the real expenses, and what is the actual income. This process, these steps, are common to most situations where a small to medium-sized business is part of the litigation activity. It can also be standard in even a large business, even one where millions of dollars go to the bottom line, if there are concerns that there are also say, hundred of thousands (or millions) of dollars that are not being reflected correctly.
This area of investigative accounting is particularly an interesting challenge when there are concerns about unreported income. In such cases, we are no longer dealing with simply analyzing what is in the books and records of the business, but trying to determine what never got into those books and records in the first place. We have extensive experience in reconstructing the financial realities of such businesses.