Benford's law and the limits of digit analysis

Druică, Elena; Oancea, Bogdan; Vâlsan, Călin

doi:10.1016/j.accinf.2018.09.004

Cited by 41 publications

(35 citation statements)

References 12 publications

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“…To verify the above, the use of the Chi-square test which is a high power test was widely observed. Also, it is problematic in large samples (Barney and Schulzke, 2016;Druica et al, 2018) and is usually complemented by measures, such as absolute mean deviation (MAD). In the case of income reported in household surveys, through the EPH, reduced compliance with Benford's law was observed.…”

Section: Discussionmentioning

confidence: 99%

“…For arbitrarily large values of the statistician, the null hypothesis will tend to be rejected and, therefore, it is concluded that the analyzed distribution does not come from a Benford¨s distribution. The Chi-square test can present problems of type I error in large samples and therefore reject compliance with Benford's law in situations where the difference in proportions is reduced (Druica et al, 2018). The same goes for Z or Kolmogorov-Smirnov type tests (Barney and Schulzke, 2016).…”

Section: Formal Testsmentioning

confidence: 99%

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Self-reported income data: are people telling the truth?

González

2020

JFC

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Purpose This paper aims to detect anomalous data in income reports of Argentina, including personal income – from a sample of households – and statements of public officials. Design/methodology/approach A widely known technique in forensic accounting – such as Benford’s Law – is used. The Chi-square test and the absolute mean deviation are used for verification. The databases consulted include the income declared by households in the Permanent Household Survey – for the 2003-2017 period – and the capital declarations of high-ranking public officials – for the period 1999-2017. Findings The results suggest that income reported in the Encuesta Permanente de Hogares do not follow a Benford´s distribution, and the degree of conformity with this decreases significantly between 2007 and 2015 – coincident with the intervention period of the Instituto Nacional de Estadísticas y Censos. Patrimonial statements of public officials present an acceptable level of compliance with Benford’s law, especially among those of the legislative branch (in more than 90% of cases) although to a lesser extent among officials of the executive branch. Practical implications The results suggest that income reports from the Permanent Household Survey, for the period 2007-2015, should be used with reservations because of their possible manipulation. Originality/value During the intervention of the official statistics institute in Argentina (2007-2015), the idea of lack of credibility of its reports has been disseminated. To date, however, there is no empirical evidence to support it related to income.

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Section: Discussionmentioning

confidence: 99%

Section: Formal Testsmentioning

confidence: 99%

Self-reported income data: are people telling the truth?

González

2020

JFC

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“…De outro lado, alguns autores não encontraram evidências suficientes para afirmar que a LNB pode ser uma ferramenta útil para a auditoria (CELLA; RECH, 2017;DRUICĂ;OANCEA;VÂLSAN, 2018;MÁTÉ et al, 2017). Entretanto cabe salientar que no caso de Cella e Rech (2017) a conclusão se baseia em estudo de caso único, enquanto os outros autores, embora tenham utilizado uma amostra mais robusta, recomendam ampliar os testes e, principalmente, o aprofundar o conhecimento acerda de fraudes contábeis antes de afirmar a a referida lei pode ser útil na sua detecção.…”

Section: Análise Dos Resultadosunclassified

“…Entretanto cabe salientar que no caso de Cella e Rech (2017) a conclusão se baseia em estudo de caso único, enquanto os outros autores, embora tenham utilizado uma amostra mais robusta, recomendam ampliar os testes e, principalmente, o aprofundar o conhecimento acerda de fraudes contábeis antes de afirmar a a referida lei pode ser útil na sua detecção. Druică, Oancea e Vâlsan (2018) sugerem que o nível de conformidade com a LNB ao longo do tempo tende a estacionar e por isso não há evidências suficientes para considerá-la como ferramenta útil na detecção de fraudes. Como não existe base teórica para postular uma hipótese de trabalho de auditoria, usaram uma série de desvios médios absolutos e desvios médios absolutos excessivos para explorar a estacionariedade.…”

Section: Análise Dos Resultadosunclassified

Lei De Newcomb Benford E Auditoria Contábil: Uma Revisão Sistemática De Literatura

Orth

Michaelsen

Lerner

2020

RGD

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Lei de Newcomb Benford - LNB, foi concebida pelo astrônomo e matemático Simon Newcomb, em 1881. Seus estudos demonstraram que a ocorrência de um número natural, de modo espontâneo ou aleatório, não se dava na proporção esperada de 1/9, mas segundo uma distribuição logarítmica. Desde então, esta lei vem sendo testada em muitas áreas do conhecimento. Em finanças corporativas, os estudiosos têm testado a lei para investigar fraudes em dados contábeis. Contudo, ainda não há consenso sobre a eficácia da LNB nesse âmbito. Assim, o objetivo deste artigo é identificar os argumentos favoráveis e contrários, bem como os métodos de pesquisa e os principais achados das pesquisas sobre a aplicação da LNB como ferramenta de auditoria. Para tanto, aplicou-se uma Revisão Sistemática de Literatura, seguindo os passos de Levy e Ellis (2006). Deste modo, além de informações sobre autoria, modelos utilizados pelos autores para suportar suas conclusões e seus principais achados, apresentam-se lacunas de pesquisa, e as implicações para o futuro da pesquisa são discutidas.Palavras-chave: Lei de Newcomb Benford. Revisão sistemática. Auditoria contábil.ABSTRACTNewcomb Benford’s Law - LNB, was conceived by the astronomer and mathematician Simon Newcomb, in 1881. His studies showed that the occurrence of a natural number, spontaneously or randomly, did not occur in the expected proportion of 1/9, but according to a logarithmic distribution. Since then, this law has been tested in many areas of knowledge. In corporate finance, scholars have tested the law to investigate fraud in accounting data. However, there is still no consensus on the effectiveness of LNB in this area. Thus, the objective of this article is to identify the arguments for and against, as well as the research methods and the main findings of research on the application of LNB as an audit tool. For that, a Systematic Literature Review was applied, following the steps of Levy and Ellis (2006). Thus, in addition to information on authorship, models used by the authors to support their conclusions and main findings, research gaps are presented, and the implications for the future of research are discussed.Keywords: Newcomb Benford’s law. Systematic review. Accounting audit..

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“…Both the Chi‐square test and KS test can present type I error in large samples, and therefore their compliance with Benford's law is circumspect in scenarios where we reduce the difference in the proportions (Barney & Schulzke, 2016 ; Druică et al, 2018 ; González, 2020 ). To alleviate this concern, we use the mean average deviation to check the concordance of the frequency distribution with Benford's law.…”

Section: Methodsmentioning

confidence: 99%

Lies, damned lies, and statistics: The uncertainty over COVID‐19 numbers in India

Mahasuar

2021

Knowl Process Manag

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This paper intends to ascertain the veracity of reported data on deaths and testing pertaining to the novel coronavirus in India. We use a widely used forensic audit technique called Benford's law to analyze the data, and our findings suggest anomalies in the reported numbers and the reported data for most of the states do not adhere to the Benford distribution. The implications of these findings are manifold, especially on the trajectory of policy‐making, vaccination strategy, and preparedness for future waves and new variants. We strongly argue for the need for a robust data collection and reporting mechanism, creating a central data repository, and instituting a data‐driven policy framework as key steps in the process management bulwark for managing such future pandemics and other events concerning public health.

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Benford's law and the limits of digit analysis

Cited by 41 publications

References 12 publications

Self-reported income data: are people telling the truth?

Self-reported income data: are people telling the truth?

Lei De Newcomb Benford E Auditoria Contábil: Uma Revisão Sistemática De Literatura

Lies, damned lies, and statistics: The uncertainty over COVID‐19 numbers in India

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