Analysing data can help a forensic accountant come to a “reasoned and intellectually honest
conclusion” (Rufus, Miller, & Hahn, 2014). For a forensic accountant to identify all the moving parts
of an investigation, they must perform data analysis. This method is used because it is impossible to
comb through all the information that is presented in a case, especially since most cases have a time
limit in which sufficient data must be prepared. Data analysis helps with this by taking a set of
information and breaking it down into manageable pieces (Rufus, Miller, & Hahn, 2014).
Unfortunately, there is no “one-size fits all” formula to analyze evidence. “Instead, much depends on
the specifics of the engagement (such as scope limitations and time constraints), the analytic strategy,
available resources, and the forensic accountant’s experience” (Rufus, Miller, & Hahn, 2014). This is
why forensic accountants must use various types of analysis techniques, such as qualitative analysis
and quantitative analysis. A qualitative analysis is typically non-numerical, such as conducting
interviews or reviewing documents and artifacts (Maryville University, 2023). In contrast, quantitative
analysis can be measured and expressed numerically, such as profit, weight, time, and age (Rufus,
Miller, & Hahn, 2014).
There are four data sources a forensic accountant can utilize to ensure that the data that has been
retrieved are sufficient and relevant (Rufus, Miller, & Hahn, 2014):
First-Party data is obtained directly from the subject individual or entity.
Second-party data is obtained from individuals or entities that are related to the subject. This would
include family, friends, co-workers, and customers.
Third-party data is obtained from entities that maintain records regarding the subject, such as financial
institutions. The reports examined may include bank statements or loan applications.
Fourth-party data are obtained from reference sources, such as news articles and academic journals.
While the above sources are helpful to the accountant, the accountant must be cautious because some
sources are not as reliable as others. For example, the accuracy for fourth-party data is not as reliable
as the second-party data because it depends on the quality of the referenced source (Rufus, Miller, &
Hahn, 2014).
The engagement determines the type of data that forensic accountants will analyze. 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. z 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. z
As a forensic accountant, the types of data that one must gather would depend on the type of
engagement. 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. z 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.). z
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
Maryville University. (2023). Top 4 Data Analysis Techniques That Create Business Value. Retrieved
from Maryville University: https://online.maryville.edu/blog/data-analysis-
techniques/#:~:text=The%20two%20primary%20methods%20for,insights%20from%20different%20d
ata%20types.
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic Accounting. Pearson Education.
