As I sad, it'll return .t. if 'data.dbf' exists antyhere along VFP search path. You can use ADIR() function instead.

PROCEDURE IsFileFound
LOCAL laTemp	
 IF ADIR(laTemp, This.cFileName) > 0
	messagebox ( 'Found')
 ELSE
        messagebox ('Not Found')
 ENDIF
ENDPROC

>DEFINE CLASS TestFile as custom
>
>cFileName =''
>
> PROCEDURE IsFileFound
>
> IF FILE(This.cFileName) = .T.
> messagebox ( 'Found')
> ELSE
> messagebox ('Not Found')
> ENDIF
>
>
>ENDPROC
>
>oFile = CREATEOBJECT('testfile')
>oFile.cFileName = 'A:\data.dbf'
>oFile.isFileFound