Computer-aided tools help in shortening and eradicating numerous repetitive tasks that reduces the gap between digital model and actual product. Use of these tools assists in realizing free-form objects such as custom fit products as described by a stringent interaction with the human body. Development of such a model presents a challenging situation for reverse engineering (RE) which is not analogous with the requirement for generating simple geometric models. Hence, an alternating way of producing more accurate three-dimensional models is proposed. For creating accurate 3D models, point clouds are processed through filtering, segmentation, mesh smoothing and surface generation. These processes help in converting the initial unorganized point data into a 3D digital model and simultaneously influence the quality of model. This study provides an optimum balance for the best accuracy obtainable with maximum allowable deviation to lessen computer handling and processing time. A realistic non trivial case study of free-form prosthetic socket is considered. The accuracy obtained for the developed model is acceptable for the use in medical applications and FEM analysis.