Relying on the Audited Financials in Divorce Cases

You'll often see the side with the money in a divorce hiding behind the fact that the financials are "audited"

Here's why you shouldn't necessarily buy that argument…

Audits are designed to provide "reasonable assurance" that a set of financials are free of "material" misstatement and present fairly under relevant accounting standards.

Audited financial statements DO NOT:

1. Investigate fraud or wrongdoing

2. Assume responsibility for preparation -- that rests with management (often the litigant)

3. Assure completeness - that $10 charge to an undisclosed Swiss bank account, probably not "material".

4. Provide for the nature and purpose of certain transactions -- i.e. travel and entertainment expense may be accurate, but may not reflect the proper level of income to be used in a valuation or support calculations

Here's the kind of things I've found in audited financial statements:

1. Personal expenses

2. Fake assets

3. Undervalued assets

4. Undisclosed bank accounts

5. Non-recurring income and expense