Tracy Coenen, CPA, CFF, MAFF, and the author of Public records in financial
investigations, describes a forensic investigation as examining data and evidence to determine
if a fraud has occurred, how it happened, who was involved, and the value lost. (Fraud Files
Forensic Accounting Blog, 2020)
To gather data or evidence, a forensic accountant should first analyze the type of
engagement or employment; A independent investigator, expert witness, firm, lawyer,
government or legal agency, or perhaps a combination. Subsequently, a forensic accountant
would analyze the engagement objectives such as embezzlement, tax fraud, securities fraud,
insurance fraud, corruption, business valuation, or computer/data forensics.
Next, a forensic accountant should look to the AICPA Code of Professional Conduct,
Rule 201 - General Standards .02 201-1. Rule 201 describes competence to complete the
prescribed professional services according to "professional standards, applying his or her
knowledge and skill with reasonable care and diligence, but the member does not assume a
responsibility for the infallibility of knowledge or judgment" (AICPA, n.d.)
Upon accepting an engagement, whether a member of AICPA or not, a fraud
examiner can look to the AICPA professional standards as a "benchmark for evaluating
forensic accounting services." (Rufus, Miller, Hahn, 2014)
(AICPA, n.d.) a describes Rule 201 and how practitioners must "obtain sufficient
relevant data to afford a reasonable basis for conclusions or recommendations in relation to
any professional services performed," while Black's Law describes the term sufficient, with
regard to data, a meaning: "of such quality, number, force, or value as is necessary for a given
purpose." (The Law Dictionary, 2014) and in auditing arenas SAS No. 106, AU Sec. 326
describes sufficient as connected with appropriateness, and as measurements of the quantity
and quality of the audit evidence. (Rufus, Miller, Hahn, 2014)
According to (Rufus, Miller, Hahn, 2014), relevance in forensic accounting is
determined by the engagement's objectives to form a hypothesis to stipulate the course of data
collection and analysis. Black's Law defines relevant data as logically connected, a tending to
prove or disprove, and having considerable probative value. (Rufus, Miller, Hahn, 2014)
(Rufus, Miller, Hahn, 2014) describes the reliability of the data as a critical element of
sufficiency and very much related to its source. The four common data sources are as follows:
first-party, second-party, third-party, and fourth-party. First-party data, such as an interview,
are obtained directly from the subject or entity and are often considered the most relevant.
Second-party data describes data from a related party, such as a family member or CPA.
Third-party data such as bank statements are generally considered reliable because the data
derives from outside the control or manipulation of the subject. Third-party data is often
retrieved from public domains such as public legal filings. Fourth-party data describes
reference sources such as case law, academic journals, articles, and databases. While this data
may be highly variable, depending on the quality of the reference source; however, this type
of data can provide reference to certain types of data or potential evidence.
Overall, relevancy depends on the specifics of an engagement, while sufficiency relies
on the availability of data and the degree of proof or evidentiary reliability. (Rufus, Miller,
Hahn, 2014)
Before closing, I think it's fair to mention that forensic accountants should consider
consulting a lawyer to ensure they are working within the boundaries of the Law. I believe
reviewing subjects such as subpoenas, warrants, and personal liability would be wise to
protect themselves from lawsuits or perhaps having their professional reputation and career
ruined. Regardless if they are working for a lawyer or not!
According to the DOJ, a search is constitutional if it does not violate a person's
"reasonable" or "legitimate" expectation of privacy. Katz v. United States, 389 US 347, 361
(1967) (Harlan, J., concurring). This case law embraces two discrete questions: first, whether
the individual's conduct reflects "an actual (subjective) expectation of privacy," and second,
whether the individual's subjective expectation of privacy is "one that society is prepared to
recognize as 'reasonable.'" Id. at 361. The DOJ also states, "No bright-line rule indicates
whether an expectation of privacy is constitutionally reasonable." (DOJ, n.d.)
References:
Code of professional conduct - AICPA. (n.d.). Retrieved March 9, 2023, from
https://us.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/downloadabl
edocuments/2013june1codeofprofessionalconduct.pdf
Public records in financial investigations. Fraud Files Forensic Accounting Blog. (2020,
October 28). Retrieved March 9, 2023, from
https://www.sequenceinc.com/fraudfiles/2020/11/public-records-in-financial-
investigations/
Rufus, R., Miller, L., & Hahn, W. (2014). Forensic accounting. Upper Saddle River, NJ:
Pearson Education.
Searching and seizing computers and Obtaining electronic ... (n.d.). Retrieved April 11, 2021,
from https://www.justice.gov/sites/default/files/criminal-
ccips/legacy/2015/01/14/ssmanual2009.pdf
Sufficient definition & meaning - black's law dictionary. The Law Dictionary. (2014, April
6). Retrieved March 9, 2023, from https://thelawdictionary.org/sufficient/
