How to Help a Client Who Is Divorcing – Providing Divorce Accounting Services

Most couples going through divorce need an accountant or CPA to help them navigate the difficult process of dividing assets and liabilities. Pennsylvania CPAs and accountants who specialize in divorce accounting will provide an invaluable service to many clients during a difficult time in their lives.

Divorcing couples have very specific needs at an extremely stressful moment in their lives. For many people, this is the most traumatic experience they’ve ever had. Emotions are high. They need calm and professional guidance to help them collect the financial information they need and make wise decisions about future financial requirements.

As a professional CPA or accountant, you can provide compassionate, professional support when divorcing people need it the most. Some of the help you can give includes:

• Identifying all sources of income: Identify the income of both spouses before the divorce and the likely income of your client after the divorce; list all current or future sources of income from investments, funds, annuities, etc.

• Listing all assets, liabilities, and expenses, current and future: This may include evaluating if one spouse is trying to spend assets before the divorce in order to dishonestly decrease assets or hoard more assets for himself or herself. Evidence of this intentionally excessive spending can be valued to that spouse, thus decreasing the final settlement for that spouse, and it can also be evidence of negotiating in bad faith, which can turn the court against that spouse.

• Determining what income, assets, liabilities, and expenses are marital income and which non-marital, belonging only to one spouse (or to the children): In some cases, non-marital assets (such as that which the spouse owned prior to marriage) can be classified as marital assets if they have been used for the family collectively

• Evaluating the present and future value of assets and who benefits more from each asset or liability (ex. car loan on the husband’s car)

• Accurately valuing a business: A business involves potential risk and ongoing effort and should not be valued in the same manner as an investment. Clearly defining past and future risks and likely future value will provide a fair and balanced representation of the true value of a company owned by one or both divorcing parties

• Recognizing red flags of possible hidden assets, unusually large purchases, gambling, fraud, embezzlement, intentionally deflating income, or other dishonest financial practices that would require the services of a forensic accountant or private investigator

• Speaking to any court-ordered third-party valuator to clarify important financial points and speed the examination of records 

You can provide invaluable service to divorcing individuals, helping your client bring to the negotiating table an accurate accounting of the couple’s financial position so that each spouse can have a fair settlement. 

However, what if your current long-term clients are going through a divorce? If you’ve been representing them both for years and suddenly they want your help in a divorce, what are some of the ethical concerns? 

A conflict of interest can occur when two or more parties have a conflicting financial or personal interest that may make it difficult for the accountant to provide his or her services fairly, independently, and objectively. Independence and objectivity are critical for the ethical fulfillment of your duties as an accountant. 

It is somewhat of a gray area since it depends on you, the accountant, to judge whether or not you can provide this service ethically. But there is also the appearance of conflict that should be avoided. When providing accounting services, you must not only be ethical but also appear ethical to the reasonable observer. Unethical behavior or unethical perception can harm not only your work and your client but also the accounting profession. Would others looking at your work question its objectivity because of a perceived conflict? 

If you perceive a conflict but believe you can be completely objective in helping them both, you should put it in writing and present it to both clients. If they both still want you to help them organize their finances through the divorce, they should state this in writing. If, however, one objects, do not work with that spouse, and consider whether you should work with the other or refer them both to another accountant with divorce expertise. 

Our PSTAP member community is a great resource for helping you determine the best way to ethically represent clients who are divorcing. You may also gain some great advice about expanding your own accounting practice to specialize in divorce accounting.