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Qu, H, Steinberg, R and Burger, R (2019)

Abiding by the Law? Using Benford's Law to Examine the Accuracy of Nonprofit Financial Reports

Nonprofit and Voluntary Sector Quarterly.

ISSN/ISBN: Not available at this time. DOI: 10.1177/0899764019881510



Abstract: Benfordís Law asserts that the leading digit 1 appears more frequently than 9 in natural data. It has been widely used in forensic accounting and auditing to detect potential fraud, but its application to nonprofit data is limited. As the first academic study that applies Benfordís Law to U.S. nonprofit data (Form 990), we assess its usefulness in prioritizing suspicious filings for further investigation. We find close conformity with Benfordís Law for the whole sample, but at the individual organizational level, 34% of the organizations do not conform. Deviations from Benfordís law are smaller for organizations that are more professional, that report positive fundraising and administration expenses, and that face stronger funder oversight. We suggest improved statistical methods and experiment with a new measure of the extent of deviation from Benfordís Law that has promise as a more discriminating screening metric.


Bibtex:
@article{, author = {Heng Qu and Richard Steinberg and Ronelle Burger}, title ={Abiding by the Law? Using BenfordāÄôs Law to Examine the Accuracy of Nonprofit Financial Reports}, journal = {Nonprofit and Voluntary Sector Quarterly}, volume = {0}, number = {0}, pages = {0899764019881510}, year = {2019}, doi = {10.1177/0899764019881510}, URL = {https://doi.org/10.1177/0899764019881510}. } }


Reference Type: Journal Article

Subject Area(s): Accounting, Statistics