Forensic Accounting is, quite simply, the application of accounting as a science to assist in the settling of legal issues. In reality accounting, as the language of business, is an issue in many commercial legal disputes. Forensic accounting is quite different from an audit in accordance with Generally Accepted Auditing Standards (GAAS) and involves specific, specialized techniques that may include the reconstruction of the transactions at issue, tracing of funds, verification of reported transactions and other in-depth analysis that does not take place in a financial (GAAS) audit. We perform all of our forensic accounting engagements with the assumption that the work will be used in a courtroom or other proceeding before a trier-of-fact.
- This forensic accounting engagement involved the analysis of the accounting and financial reporting of more than 40 legal entities owning assets that ranged from oil and gas properties and startup “angel” type investments to a golf course, country club and real estate developments. Some of the legal entities were operated by the family office and some were passive in nature.
- The legal entities were organized in “tiers” with complex parent and subsidiary relationships that had become so complex and unwieldy that the true financial status of each entity was virtually impossible to discern.
- This 18-month project involved the analysis of what had been invested by the family office in each of the individual entities, a restatement of each entity’s financial statement and the collapsing of the entity structure from more than 40 entities to less than 20 legal entities.
Commercial Office Building Partnership
- This engagement involved the reconstruction of 10-years of financial information related to an office building owned equally by a managing general partner and our client, the non-managing general partner.
- Our work uncovered a new legal entity, formed by the managing general partner, that was unknown to our client, the non managing general partner.
- Working collaboratively with our client’s counsel, we developed document requests focusing on the relevant accounting records including the general ledgers, federal tax returns, franchise tax returns and financial statements for the known entity and previously unknown entity.
- Our analysis uncovered a scheme that was intended to inflict financial harm on our client.
- Once our analysis was complete, we presented our findings to the opposing party at a court ordered mediation, resulting in a settlement of the dispute at mediation.