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). With this in mind, 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. 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.
The engagement determines the type of data that forensic accountants will analyze. d The goal is to
ensure that they have adequate support to give an expert opinion in the engagement. Under the
Federal Rules of Evidence Rule 702, expert testimony can be admissible only if it meets the
following criteria:
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. (Rufus, et al., 2015)
To ensure that the data is sufficient, the data must be enough and of value to support the final
decision. If there isn’t enough data, you will not be able to give an informed testimony. Relevant
data in forensic accounting deals with the objectives of the engagements. Relevant data is
connected to the subject that you are discussing. Reliable data is when the data you obtain is
accurate and complete. When you have reliable data, you can make good decisions from it. If the
data is not reliable it effects the integrity of your results.
All these items are needed to give an educated testimony for your engagement. You will not be
able to meet your engagement objectives without sufficient, relevant, and reliable data. d
As a forensic accountant, the types of data that one must gather would depend on the type of
engagement. d A forensic accountant could be tasked with performing valuations and estimations of
losses or damages, investigating related party transactions, mergers and acquisitions and of course
financial fraud. The three general rules to adhere to ensuring sufficient, relevant and reliable data
are: 1) Data is based on sufficient facts or data, (2) the data is the product of reliable principles and
methods and (3) lastly the principles and methods have been applied reliably to the facts of the
case (Rufus, i.e.). d
How much and what type of data that is to be acquired would depend on a lot of factors, such as
how strong the internal controls of the organization are, availability and consistency of the data and
the degree of cooperation of the client.
When conducting a forensic accounting or fraud examination, it is all about the data! How do we
prove fraud exists? We gather information, data. We use this data to conduct our analysis.
However, what determines the types of data that you will analyze? How do you validate data once
you gather it? Is data from third parties more reliable than data received directly from the client?
When responding this week, also think about how the forensic accountant would keep the data
secure.
References:
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic Accounting. Pearson Education (US).
Rufus, R., Miller, L., Hahn, W. (2015) Forensic Accounting. Pearson Education
Rufus, R. J., Miller, L. S., & Hahn, W. (2015). Forensic accounting. Pearson.
