Gathering Data in Forensic Accounting
Forensic accounting stands at the intersection of accounting and criminal investigation. Like a
traditional colleague, a forensic accountant works with financial records. However, instead of noting
trends and providing suggestions to the management, this specialist searches for evidence of fraud
(Jordan, 2022). As a forensic accountant, I would analyze information from multiple sources in order
to reveal discrepancies and errors pointing to potential fraud schemes. Specifically, I would study
audit results to determine the validity of financial statements. In addition, I would study supply and
service contracts to find strange patterns and trace corporate fraud disguised as legit business deals.
Furthermore, I would interview staff members of companies involved in suspicious activities to
confirm the evidence gathered after financial records and contract analysis. Overall, the type of data
analysed in forensic accounting is determined by the initial source of suspicion. However, financial
statement analysis is usually the first step, whereas contract analysis and interviews act as a failsafe
that helps reveal the truth or prevent false accusations.
Since forensic accounting is a complex profession, an analyst must rely on special tools to ensure the
quality and reliability of the gathered data. The fundamental principle of forensic accounting lies in
finding patterns, actions, relationships, and transactions pointing to fraud schemes. For that
purpose, professional accounting companies utilize analytics repositories that identify and
consolidate warning signals and conduct network mapping to explore potential fraudster
relationships (Deloitte, 2018). In addition, forensic accountants employ algorithms that sift through
massive amounts of data to identify deviations from ordinary behaviours or compare cases to
historical fraud schemes (Deloitte, 2018). Ultimately, the data gathered by a human analyst gets
extensively checked by powerful data-mining algorithms that help identify rare events and prepare
the evidence for presentation.
The types of data that a forensic accountant will need to analyze will be determined by the type of
case that they are working on. Even if two cases are the same, they may still require different data
analysis (Rufus et al., 2015). As the text states, a business valuation case could require different data
than the next due to what is being looked at in the case. Doing due diligence will better allow the
accountant to decide what data is necessary. Having sufficient and relevant data can be a matter of
professional judgement (Rufus et al., 2015). While it is easy to see when data is insufficient and
irrelevant, it can be much more difficult to determine what is. A like most things in business,
opinions will vary on what is sufficient and what is relevant to a certain case. The best way that
anyone can know that they have enough data is to make sure to do due diligence for every case.
Getting into a mindset where they think that the same data will work for every case of a certain type
can be very dangerous. It can also be noted that depending on if the case is one looking for fraud or
just an analysis will change the type of data that is needed. Reliable information can be difficult to
obtain in some situations also. In the case study that I am working on for my final, the company had
two sets of books going at the same time. While the auditing firm was able to say that nothing stood
out to them as fraud from the made-up set of books, does not mean that it was not reliable
information. Some of the information provided was accurate, however not all was. One needs to be
able to decide if they are taking everything at face value or questioning just parts of the information
and data.
References
Deloitte. (2018). Forensic analytics in fraud investigations: Identifying rare events that can bring the
business down. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/us-
forensic-analytics-in-fraud-investigations.pdf
