A forensic accountant uses data analysis to determine what the information presents. Often, there is
too much information and it is not always relevant, so data analysis helps to identify sufficient and
relevant data which can be used to form a conclusion. The type of data collected and analysed is
often dependent upon the type of engagement the forensic accountant is performing. This is
because the forensic accountant needs to collect sufficient, relevant, and reliable data to give an
opinion and to support it.
Sufficient data refers to the measure of the quantity of audit evidence, or the forensic accountant
needs to collect enough audit evidence to be able to support the conclusion. In addition, data needs
to be appropriate, which is a measure of the quality of audit evidence. Appropriateness ensures that
the data collected is both relevant and reliable in providing support for the conclusions reached by
the auditor. Relevant data refers to how it connects to the assertion or objective of the control being
tested while reliability is dependent on the nature and source of the evidence as well as the
circumstances under which it is obtained. If a control is ineffective, then the data or evidence
collected from the control is likely to not be very reliable. Additionally, information collected from an
independent third party is more reliable than evidence only collected from internal company
sources. Having sufficient, relevant, and reliable data to give a testimony is required in order to
provide an expert testimony that is admissible according to Federal Rules of Evidence Rule 702.
As a forensic accountant, you will have many areas of fraud that you can be looking at. c This is one
part of determining what data you will analyse. c If you are looking at financial statement fraud, you
will analyse the data used to create the financial statements such as sales registers, purchasing
registers, etc. If you are looking at tax fraud, you are going to want to look at income statements,
expenses created that could be used to reduce the taxable amount, documentation on deductions,
etc. You also want to review bank statements to see if there are any weird transfers of money to
accounts vendors that are not known or used.
To ensure you have reliable data, you must find secondary sources to confirm the amounts listed
such as AR or bank confirmations. c You need some sort of outside source to help back up the data
being provided. c You should run through the internal controls and reach out to several employees to
test the controls as this would help prevent fraud and give you assurance that the data is reliable.
Before the forensic accountant can start collecting data, they must first identify the type of fraud
case they are facing within the engagement and what industry is involved. For example, cases of
insurance fraud may call for a different type of evidence than credit card fraud. Once you have
established the kind of fraud, the type of evidence necessary to crack to the case will become easier
to identify. The forensic accountant must also identify which of the four common types of data
sources are necessary in the case: first-party, second-party, third-party, and/or fourth party. First-
party data would be the use of interviews, because these come directly from the source these are
the most relevant. Next, the second-party data is data collected from a related party. Bank
statements are third-party data and can also be reliable. Lastly, the fourth-party data are sources
used for reference. For evidence to be sufficient, relevant, and reliable it must support the claim(s)
and expert opinions presented in the engagement and afford a reasonable basis for a conclusion.
As a forensic accountant one must consider several factors when considering an engagement. c This
includes what kind and how much data to collect for each engagement which is guided by Federal
Rules of Evidence (FRE) 702 and Rule 201 of the American Institute of Certified Public Accountants
(AICPA). c However, there is no clear answer to what is sufficient, relevant, and reliable because each
engagement is unique in nature and will require different levels of information or data (Rufus, Miller,
& Hahn, 2015). c Therefore, the first step in gathering data is planning what is required for the
engagement to be a success. c This could include first, second, third-, and fourth party information
and data which may need to be sorted through to determine relevancy and reliability for the
engagement (Rufus et al, 2015). c Information received from the start may seem relevant and
reliable, but then could result in misleading data or information after one has done their due
diligence of verifying the information. c Additionally, a forensic accountant maybe constrained by
time, access to the information, technical resources, and other data limitations (Rufus et al, 2015). c
Consequently, a forensic account must use professional judgement in determining what consists of
sufficient data and information.
Additionally, as a result, data planning, collection, and preparation require analysis to determine
relevance and reliability. c Furthermore, an engagement is often related to analysing, interpreting,
summarizing, and presenting information and data in a format that is both understood and
supported with facts. Therefore, a significant conclusion in an engagement necessitates the proper
analysis and interpretation of various forms of both quantitative and qualitative data for a successful
engagement. c Ultimately, the forensic accountant must base his/her expert opinion on the
information and data and be able to explain, if necessary, the results of the analysis. c The basis
should be reasonable to anyone in the specific field the engagement is involved in. c Therefore, the
forensic accountant must be able to justify what is sufficient, relevant, and reliable from the
information that is available and, in some cases, when information or data is lacking. c In my opinion,
this is why areas of specialization and knowledge assist the forensic accountant in providing
sufficient, relevant, and reliable information. c Plus, the more information one can provide to back an
opinion the less room for objections to occur.
References:
Rufus, R. J., Miller, L. S., & Hahn, W. (2015). Forensic accounting. Boston, MA: Pearson.
Robert Rufus, L. M. (2015). Transforming Data into Evidence (Part 1). In L. M. Robert Rufus, Forensic
Accounting 1st Edition. Pearson Education.
PCAOB. Accessed March 9, 2023. Auditing Standard No. 15.
https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditing-standards-
interpretations/details/auditing-standard-no-
15_1787#:~:text=Appropriateness%20is%20the%20measure%20of,the%20auditor's%20opinion%20i
s%20based.
Rufus, R., Miller, L., Hahn, W. (2015). Forensic Accounting. Pearson Education.
