Five Signs You Might Need a Forensic Accounting Investigation

Financial disputes or irregularities can be both overwhelming and complicated. When faced with such challenges, sometimes the best course of action is to seek clarity through a forensic accounting investigation. Forensic accounting is a crucial tool in uncovering financial discrepancies and transparency in legal matters. 

Whether you're facing a divorce, dealing with business disputes, or investigation a case of fraud, a forensic accounting investigation can provide critical insights into challenging financial situations. But how do you know when forensic accounting is necessary? 

At Iwanyshyn & Associates, located in Allison Park, Pennsylvania, we are experienced in managing forensic accounting investigations and our attorneys can help provide the critical information you need to protect your interests.

Here, we explore five situations that might benefit from a forensic accounting investigation. 

What Is Forensic Accounting?

Forensic accounting is a specialized field that combines specialized accounting, auditing, and investigative techniques to uncover inconsistencies, mismanagement, fraudulent activity, or other financial crimes. This type of accounting goes beyond standard bookkeeping and auditing practices and requires a deep understanding of both financial principles and legal proceedings. Some common types of forensic account include: 

• Fraud investigation: Involves identifying and tracking fraudulent activities, such as embezzlement, money laundering, or tax fraud. 

• Bankruptcy and insolvency: Involves analyzing financial records to determine the solvency of a company or individual. 

• Business valuation: Involves determining the value of a business for purposes such as mergers and acquisitions, estate planning, or divorce proceedings. 

Forensic accountants are often called upon to provide expert testimony in legal proceedings and serve as consultants to help lawyers understand complex financial information. 

Signs You Might Require a Forensic Accounting Investigation

If you suspect financial discrepancies, irregularities, or misconduct, a forensic accounting investigation can often help you uncover hidden issues and provide clarity in complicated financial situations. Here, we provide insight into some of the most common signs that could indicate the need for such an investigation. 

Suspicion of Hidden Assets in a Divorce

Under Pennsylvania law, marital property must be divided equitably in a divorce. However, achieving a fair division can be challenging if one spouse is suspected of hiding assets. Some common tactics used to conceal assets may include: 

• Understating income 

• Overestimating expenses 

• Transferring money to third parties or secret accounts 

If you believe your spouse might be hiding property, a forensic accountant can thoroughly analyze their financial records, tax returns, bank statements, and transaction histories to identify potential discrepancies. This is especially relevant in Pennsylvania divorces, where the courts consider the economic circumstances of each party when dividing marital property. 

Unexplained Financial Discrepancies in Your Business

If you are a business owner or partner in Pennsylvania, it's essential to monitor your company’s financial health. However, unexplained discrepancies in revenue, expenses, or account balances could indicate fraud, embezzlement, or employee misconduct. 

For example, if company funds are disappearing without clear records or documentation, it may be time to involve a forensic accountant. These investigations can help pinpoint unauthorized transactions, identify misappropriated funds, and determine the root cause of financial irregularities. 

This is critical not only for resolving disputes but for implementing improved controls to prevent future issues. Pennsylvania businesses, regardless of their size, have a legal obligation to maintain accurate financial records, and a forensic investigation can provide much-needed clarity and oversight. 

Concerns During Estate Administration

Administering an estate can be a challenging process, particularly when there are disputes among heirs or beneficiaries regarding how the decedent's assets are handled. Pennsylvania probate law requires executors to act in the best interest of the estate, which includes providing clear and accurate financial accounting to all parties involved. 

However, if allegations of mismanagement or fraud arise, a forensic accounting investigation can help uncover the truth. Forensic accountants can examine how the assets were managed, trace property or funds that may have been improperly distributed and ensure compliance with Pennsylvania's probate and inheritance tax laws. 

Significant Financial Changes Without Explanation

Whether in a personal or business context, sudden and unexplained changes in your financial circumstances can be a red flag. For instance, depleted savings, unexplained debt, or unaccounted-for withdrawals could indicate fraudulent activity. Similarly, in corporate settings, declining profits or missing funds often warrant closer examination. 

Fraud, identity theft, or mismanagement may all result in noticeable and concerning shifts in financial activity. However, a forensic accounting investigation can often uncover patterns or hidden behaviors that may not be immediately obvious. 

Disputes Among Business Partners or Shareholders

Partnership and shareholder disputes can arise for a multitude of reasons, but financial disagreements are typically among the most common. If you suspect a partner or shareholder of misusing company funds, diverting revenue, or committing fraud, a forensic investigation can provide clarity and insight. 

These investigations often involve a meticulous review of financial agreements, banking records, and financial statements to uncover any irregularities. Under Pennsylvania law, individuals in fiduciary roles have a duty to act in the best interest of their company or partners. When this duty is breached, a forensic accountant’s findings can significantly impact the outcome of your case. 

How Our Firm Can Help

At Iwanyshyn & Associates, we are committed to providing thorough and proactive legal guidance to our clients throughout Pennsylvania. Whether you're facing hidden assets in a divorce, financial discrepancies in your business, or suspected fraud in individual or business accounts, our firm provides experienced and tailored forensic accounting services 

Our skilled attorneys will collaborate closely with forensic accounting experts to make sure all financial investigations are as detailed and accurate as possible. We understand that financial disputes can take a significant toll, not only in monetary terms but also in your peace of mind. Therefore, we take the time to understand your unique circumstances and craft personalized strategies tailored to your needs. 

Trusted Pennsylvania Family Law Guidance

Facing a complicated financial situation, whether individually or for your business, can be challenging. However, forensic accounting can be a useful tool for uncovering financial inconsistencies, mismanagement, or fraudulent activity. If you believe a forensic accounting investigation could benefit your case, our team at Iwanyshyn & Associates can help. 

Located in Allison Park, Pennsylvania, we serve clients in Conway, Butler County, and surrounding areas. Together, we can work to protect your financial future and provide the clarity and resolution you need. Contact us today to schedule a consultation.