Forensic Accountant Situation

[geekgirldany]

I do not want to get into the same mess as I did last year. I have another client getting divorced and their business is being looked at by a forensic accountant/cpa. Client has already told me the accountant would be asking me questions about the business/tax return.

I did the same thing last year but told the client I would only reply if questions and emails came directly from him. So I did answer those questions. The accountant took some of answers to the questions and turned them around to mean something totally different.

Like I said, do not want to be in the same mess again, how should I handle this? Should I even answer any questions about the business and/or items on the tax return? Or should I just tell them I prepared the return based on the information given and leave it at that?

Would appreciate some feedback from others that have gone through something similar.

Thanks

[BHoffman]

I do not want to get into the same mess as I did last year. I have another client getting divorced and their business is being looked at by a forensic accountant/cpa. Client has already told me the accountant would be asking me questions about the business/tax return.

I did the same thing last year but told the client I would only reply if questions and emails came directly from him. So I did answer those questions. The accountant took some of answers to the questions and turned them around to mean something totally different.

Like I said, do not want to be in the same mess again, how should I handle this? Should I even answer any questions about the business and/or items on the tax return? Or should I just tell them I prepared the return based on the information given and leave it at that?

Would appreciate some feedback from others that have gone through something similar.

Thanks

Dany - did you do the bookkeeping for the client's business?

[geekgirldany]

No the client did the bookkeeping in Quickbooks. I prepared the quarterly payroll forms and then the S-Corp tax return. I entered General Journal entries in QBs to reconcile with the tax return.

[BHoffman]

No the client did the bookkeeping in Quickbooks. I prepared the quarterly payroll forms and then the S-Corp tax return. I entered General Journal entries in QBs to reconcile with the tax return.

Then all I would do is give the client a list of the adjusting journal entries you made with good explanations of why you made them, and let the client deal with the forensic accountant unless someone shows up at your door with a court order.

[Roland Slugg]

If your clients have asked you to cooperate with the other accountant who is doing forensic work in connection with their divorce, why don't you just do it? Seems to me that refusing would be a pretty anti-client attitude to take.

All the forensic accountants I've been involved with have just been trying to gather needed information to help them come up with a complete list of the divorcing couple's assets and liabilities and, in some cases, attempt to make reasonable estimates of those assets' values.

[TXEA]

There should be nothing to worry about here. Just get a signed disclosure document from the client allowing you to discuss the return and books with the outside accountant. Simply answer the questions you know, and if you don't know the answer, just tell them.

I also see no reason why the client could not be there. After all, it is his/her books.

[geekgirldany]

Not trying to be "anti client" but like I said.. I went through a similar situation last year and it did not go well. I was nearly called to court and was very stressed about it. I do not want to be in the same position again.

Without going into great detail this may go beyond a business evaluation.

I do not mind answering questions about certain items on the tax return but want to make sure I am not breaking any disclosure laws in the process in regards to what I can and can not discuss. I will get a signed disclosure statement at the same time I do not want to be called to court because of my answers.

Like I said similar situation last year and I am very paranoid. I wasn't prepared last time for how bad things could get that I would be called to court.

Thank you all for responding.

[ATSMAN]

If you believe you may be called to testify as an expert witness or give depositions, you must put in writing to your client and/or the attorney your hourly rates, including travel expenses etc. I have done that and in most cases they will back away from calling you unless your testimony is absolutely essential and then they will pay you for your time and expense. One one case I negotiated a hourly rate of $30 and full reimbursement of all travel costs plus meals. Some attorneys believe the more experts they have the better their case is!

If you are not the bookkeeper but just a tax return preparer based on the data provided by the taxpayer, PLEASE keep your testimony to what you actually did NOT what you may think the taxpayer intended or actually did. The opposing attorney will try to draw you in. Be as clear as possible to how you actually calculated the figures and NOTHING more! Keep your opinions strictly to the facts and activity that you actually have personal knowledge.

If you feel uncomfortable you may want to consult with your attorney or E&O carrier first.

[Burke]

We probably have all had the experience of attorney demands for written declarations (most especially on business returns) that we "certify" the completeness and correctness of income and expenses for the client. In most cases, unless you do the books and have access to all bank records, income records and expenses, etc., you cannot do this. I will not issue a statement certifying to anything except for the fact that the information provided by the client was properly recorded on the tax return, or something to that effect. Have the Forensic accountant put his questions in writing, so that you are not caught off guard and can answer properly and reasonably. I would make every attempt to avoid a personal meeting or doing this over the phone. However, should this become necessary, do not hesitate to decline to answer anything with which you do not feel absolutely comfortable. Just say, "I'll have to check my records, do some research, etc, and get back to you on that." A call to appear in court would be billed and you should be compensated, but unless you can provide substantiating documentation to support the client's case, it is unlikely you would be called.

[Nashville]

You are in the Cross-Hairs

Not trying to be "anti client" but like I said.. I went through a similar situation last year and it did not go well. I was nearly called to court and was very stressed about it. I do not want to be in the same position again.

Dany, this is uncomfortable for you but you have to take responsibility for what you do. If you do not respond at all, you actually INCREASE your chances of being subpoened into court. No one else will be able to walk down the road for you because if need be, that other person could be nullified for lack of "best evidence." You should have your client's permission to discuss with the forensic accountant, in writing. You should also insist that questions from the forensic accounting be in writing and limit your response to writing as well.

The forensic accountant has been hired by one party or another, most likely by the non-owner spouse. This party is most likely not your friend. Stick to the truth and make sure you document everything. Also, you were given good advice to set forth your rates in the event you are drawn into court. Whoever has you called into court will have to pay you, and this may cause them to back off unless they think they can twist your information.

I can't imagine that any of us enjoy situations like this, but I don't know how they can be avoided.

[BHoffman]

Cross hairs? I like the dramatic flair, but none of us are under any obligation to respond to client's messy divorce crap unless served with a subpoena.

Here's what I'd do:

Give the client my workpapers which would include:

A P&L with the title being: "Tax Worksheet for Revenues and Expenses". I'd put a footer line stating "Information supplied by Management".

A Balance Sheet with the title being: "Tax Worksheet for Assets, Liabilies, and Equity". I'd put a footer line stating "Information supplied by Management".

A list of adjusting journal entries I made with an explanation of why I made them.



A letter stating that I was hired to prepared the tax return according to information provided by management, and that my enclosed response covers all transactions of which I have any knowledge.

I would make it clear in the letter that since I was not hired to perform any bookkeeping duties, I cannot advise on any details.

I would include in the letter a sentence stating that I have returned all original documents (and make sure to do that).

I would include in the letter a sentence stating that I am not aware of any pending issues (unless there are any).

I would include in the letter a sentence stating that I am unavailable until after April 15, 2015. There's no way you're going to get a subpoena. That's just scary talk.

And then, after all of the dust settles, I would resign.

[geekgirldany]

The forensic accountant has been hired by one party or another, most likely by the non-owner spouse. This party is most likely not your friend. Stick to the truth and make sure you document everything. Also, you were given good advice to set forth your rates in the event you are drawn into court. Whoever has you called into court will have to pay you, and this may cause them to back off unless they think they can twist your information.

Little late posting, have a cold.

I want to thank everyone for their advice.

Ron, I believe this is true, about the forensic accountant. It was the same last year but one of the clients did not tell me the truth about the other spouse hiring the accountant. Not sure if that would have changed things though me knowing that.
I would like to give more details about what happened that is making me so paranoid this time... but of course I can not. I will just say that I learned a huge lesson.

I did use a disclosure release last year but it wasn't very detailed. I will draft one up that covers more bases including fees.

I like the Hoff's post on how to handle it... at the same time if they ask a question directly related to a item on the tax return I will answer...
based on the recommendations as AtsMan laid out. Very through thank you for that.

Thank you all, it really helps to talk it out with others that understand.

[ATSMAN]

Don't get bullied by the opposing attorney! Stand your ground!