Data can be classified as either qualitative or quantitative. Qualitive data cannot be measured like a
sight, sound, documents, or interviews. Quantitative data can be measured like profit, age, time, or
weight. As a forensic accountant not, all data is of interest, “…we seek to identify data that are
sufficient to support an expert opinion and relevant to the specific objectives of the engagement”
(Rufus et al., 2015, p. 227). Rule 201 of the AICPA’s Code of Professional Conduct and Rule 702 of
the Federal Rules of Evidence both discuss that an expert witness’s opinion must be based on
sufficient relevant data. Rule 201 states accountants must comply with the standards and
interpretations of said standards designated by the council. These standards include professional
competence, due professional care, planning and supervision, and sufficient relevant data (AICPA,
2013, p. 2935). Rule 702 describes what qualifies a witness as an expert. To be an expert witness,
the accountant must have specialized knowledge that will help understand evidence, a testimony
that has sufficient facts or data, a testimony that is a result of reliable principles and methods, and
that said principles and methods are applied reliably to the facts (Federal Evidence Review, 2016).
In identifying data, it is important to ensure the data meets sufficiency and relevance. Meeting these
standards is relative as it depends on the specific engagement. Data for one engagement may not be
relevant in another engagement. “When evaluating sufficiency, a key consideration is the availability
of data” (Rufus et al., 2015, p. 229). Limited data may lead to a lower threshold. Relevance is tied to
how pertinent the data is to the engagement.
Another element of sufficiency is the reliability of data. Most of the time, reliability is tied to its
source. Data can be obtained via first-party, second-party, third-party, and fourth-party. First-party
data can pose some implications as it comes directly from the subject. Second-party data may be
more reliable as first-party data as it comes from a related party. Third-party data is generally
considered reliable as they are usually items like bank statements. Fourth-party is variable as the
quality depends on the source. c (Rufus et al., 2015, p. 232).
As a forensic account, the type of data that will be analysed is determined by each specific
engagement. Different types of data will be analysed for different types of engagements. Sufficient,
relevant, and reliable data is all subject to the expert’s opinion, and can vary from person to person.
Because ever engagement differs in some way, whether minute differences or large ones, so there is
no "one-size-fits-all approach" to defining relevant and sufficient data (LaGrossa, 2023). LaGrossa
continues to explain that the AICPA's professional guidance proclaims assumptions that have the
biggest effect deserve the most attention (2023). Thus, it is of the utmost importance that forensic
accountants thoroughly analyze each engagement to have the best opportunity to obtain the most
relevant and sufficient data. The Federal Rules of Evidence (FRE) have specific rules for evidence and
date, Rule 401 states evidence is relevant if it makes the fact probable than without the evidence
and that "the fact is of consequence in determining the action" (Rule 401. Test for Relevant
Evidence, 2011). The forensic accountant must follow the objectives of the specific engagement, and
use their expert knowledge to develop their hypothesis and collect relevant, sufficient, and reliable
data.
References
LaGrossa, J. (2023, February 7). What constitutes sufficient relevant data in CPA forensic services
engagements? The Legal Intelligencer. Retrieved March 9, 2023, from
https://www.law.com/thelegalintelligencer/2023/02/07/what-constitutes-sufficient-relevant-data-in-
cpa-forensic-services-engagements/
Rule 401. Test for Relevant Evidence. (2011). LII / Legal Information Institute. Retrieved March 9,
2023, from https://www.law.cornell.edu/rules/fre/rule_401
Reference
AICPA. (2013, June 1). Code of Professional Conduct and Bylaws. AICPA. Retrieved March 9, 2023,
from https://us.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/ c
downloadabledocuments/2013june1codeofprofessionalconduct.pdf
Federal Evidence Review. (2016). Federal Rules of Evidence (2015). Retrieved from
https://web.archive.org/web/20180831001530/http:/federalevidence.com/rules-of- evidence
Rufus, R., Miller, L., & Hahn, W. (2015). Forensic accounting. Upper Saddle River, NJ: Pearson
Education.
