Data analysis is the breakdown of information (data) into segments that help to make informed
decisions. c For the information to be useful, there must be a well thought out approach answering
several questions; what data is required, how will the data be analysed, and how will the results
help support the response. c It is important to take into regard the limitations of the data as well,
such as missing data, altered data, data form, data definition, unretained data (Robert Rufus, 2015). c
Other considerations are time constraints, access to the data, and technological resources.
To obtain the data it must come from a reliable source.
The first party data comes directly from the individual or entity and is the most meaningful.
The second party is a source that is connected to the subject and may have firsthand information.
Third party data is data that has been retained from an outside source such as a governmental
agency or financial institution.
Fourth party data is not specific data but more informative of the subject’s environment (Robert
Rufus, 2015).
A good analysis is dependent on the data being sufficient and relevant. c AICPA Rule 201 requires
there be sufficient data to allow for reasonable conclusions or recommendations. c Sufficient should
be in quantity and quality and is supportive of the opinion. c Relevant is dependent on the actual
purpose for the engagement which guides what type of data should be obtained (Robert Rufus,
2015).
As a forensic accountant, the specific data obtained will need to be tailored to the objectives of
intended engagement. In general, when data analysis is conducted, “we take some set of
information and break it down into manageable pieces. The purpose of this action is to drill down to
the essence or meaning of the information, which may not be apparent when viewed as a whole.
This interpretation highlights an important aspect of data analysis—its strategic nature. In a forensic
accounting engagement, successful data analysis is not conducted indiscriminately. It requires a well-
defined purpose, careful planning, and a systematic process, all aimed at refining the working
hypothesis” (Rufus, 2015, page 227). The data obtained needs to sufficient to support their expert
opinion and will be the basis for their witness testimony per Rule 702 and 401 of the federal rules of
evidence.
Rule 702 of the federal rules of evidence states that the testimony of an expert witness would be
allowed if it will help the trier of fact see scientific, technical, or other specialized knowledge of
evidence. c The three specific criteria are:
The testimony is based upon sufficient facts or data.
The testimony is the product of reliable principles and methods.
The principles and methods have been applied reliably to the facts of the case.
With regards to the issue of being sure you have sufficient, relevant, and reliable data, data is
sufficient when it can support your expert opinion, is relevant to the objectives of the engagement,
and support your working hypothesis.
References
Rufus, R. J., Miller, L. S., & Hahn, W. (2015). Forensic accounting. Pearson.
Robert Rufus, L. M. (2015). Transforming Data into Evidence (Part 1). In L. M. Robert Rufus, Forensic
Accounting 1st Edition (pp. 227-246). Pearson Education.
