Rule 702 of the Federal Rules of Evidence states that the expert opinion of forensic accountants
must be grounded in sufficient relevant data. Finding sufficient and relevant data can be tricky, as
what is relevant or sufficient in one engagement may not be in another. Some engagements may
have an immense amount of data available, while others may have very little. Time will always be an
issue where there is a lot of data, additionally, access to the data and availability/access to
technology both play a role as well. Data can also be categorized into four levels, first, second, third,
and forth. As a forensic accountant I would strive to collect as much first and third-party data as I
can. First party data is firsthand information, second party is second hand (one degree of
separation). Third party is data that comes from the people/entities who maintain records on the
subject and fourth is scholarly articles (including news publications and government statistics). Each
level has its own pros and cons; however, I feel that the strength and validity of data most often lies
mostly in first- and third-party data (Rufus, Miller, & Hahn, 2015).
There are five main ways that forensic accountants typically gather data: interview, observation,
public record, social media, and financial statement analysis. But the type of data I would collect and
analyze would be case dependent. However, in order to be sure that I have sufficient and relevant
data I would choose to vary my data gathering techniques (Rufus, Miller, & Hahn, 2015).
As a forensic accountant, there are a few things that will determine the types of data that the
forensic accountant will analyze. The main thing is that the accountant is required to analyze data
that is relevant to the case that is being examined. The data must be suitable for the analytical
purpose and needs of the case. The forensic accountant must isolate their data sources because this
gives an insight into the isolated issue that is being investigated. Also, the data needs to be of great
accuracy and dependable. The accountant must determine if the data has been recorded in a
reliable and accurate way. The data must also meet standards set by the GAAP and IFRS. This allows
the accountant to conduct themselves with impartiality and objectivity. It is also important that the
data is equally objective. “An accountant would look at factors like historical sales numbers,
employee retention patterns, organizational spending, and equipment life-cycles. Structure Business
Improvements: When an area of the company is not performing up to expectations, data analytics
can pinpoint where improvements might be needed” (Franklin University, 2023).
The forensic accountant can be sure that they have sufficient, relevant, and reliable data by making
sure that the accountant prepares the data and examine the process and internal controls within the
organization. Understanding the contextual clues is extremely critical for the accountant. Gathering
reliable data that was generated from various areas can be interpreted by understanding the
environment and the circumstances for which the data needs to be collected for. Once the
accountant gets a full understanding about what kind of data or evidence is needed and what it is
going to be used for, then they will be in a better position and be able to provide the right kind of
information needed.
REFERENCES:
Franklin University. (2023). Accounting & Data Analytics: What You Need to Know. Retrieved from:
https://www.franklin.edu/blog/accounting-mvp/accounting-data-
analytics#:~:text=An%20accountant%20would%20look%20at,where%20improvements%20might%20
be%20needed.
Rufus, R. J., Miller, L. S., & Hahn, W. (2015). Forensic accounting. Pearson.
