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).
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. 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.). c
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).
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.
