When Might an Accountant have a Conflict of Interest?
By Dianna Gould-Saltman

            When it comes to an accountant’s conflict of interests, the key is independence: personal, financial and business.  In a family law context that plays itself out in a variety of ways.

            1.   Personal conflict.  Accountants sometimes conduct business with other businesses for whom they provide services.  When a key employee, owner or officer of that other business gets divorced, the accountant may have a duty to the business, to the individual or both.  If a client’s business is owned by the client who is married, it may, and probably does, have a community property interest or may be fully owned by the community.  That means the client-employee and the client-owner’s spouse are really the “clients” of the accountant.  It is likely that the accountant has had more dealings with the “in-business” spouse than the spouse who does not regularly work in the business.  This personal relationship may make it difficult for the accountant to be fully neutral in doing work for the business in a way that is fair to both spouses, especially if one will end up with the business and the other will be “bought out.”

            2.   Financial conflict.  An accountant may do work for a client and also share a financial interest in a joint venture with a client.  Should that happen, or should it be discovered that this has happened, a conflict may exist and either the venture or the accounting relationship may need to be relinquished.

            3.   Multiple roles.  Here is where the potential for conflict is greatest.  When spouses divorce it is often the case that one spouse has been participatory or more participatory in the business. Nevertheless, the business may be an asset of both spouses.  The accountant for the business may be called upon to either serve in a forensic capacity to value the business or to assist a forensic accountant to value the business.  This creates a potential for conflict depending upon what is then done. 

            If the accountant provides neutral information to the forensic accountant (e.g. profit and loss statements, bookkeeping ledges or disks, supporting documentation) and makes these things available to the forensic evaluator for either or both parties, there is no conflict.  If, however, the accountant treats one spouse as the “client” and the other as an adverse party, there is a conflict.  Likewise, while the accountant may provide information upon which the forensic accountant can base a determination as to the value of the business, or component parts of the calculation on which that value is determined, it would be inappropriate for the accountant to provide an analysis of the value or of the component parts of the calculation, which require the exercise of discretion (e.g. cap rate, collectability of accounts receivable, etc.)