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Yang, L (2014)

Benfordís Law and Fraud Detection

Honors Thesis, Williams College.

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



Abstract: Benfordís Law describes the situation in which the frequency distribution of the first digits in a real-life data set does not follow a uniform distribution. Rather, the probability of a digit d occurring as the leading digit of a data point is the difference between d+1 and d on a logarithmic scale with base 10. This phenomenon has been regularly used by auditors as a tool to detect fraud. The bootstrap is a resampling method which can be used to estimate the sampling distribution of an estimator, first proposed by Efron in 1979 [Ef]. We apply the bootstrap method to find a way to reduce the number of data points required for effective fraud detection based on Benfordís Law. Oftentimes an auditor may not have access to all the data; a method using a subset of the data for fraud detection makes the auditorís job possible and potentially saves both human and computational resources. We have found that assuming that a data set of size 5000 or more is either free of manipulation or a result of summing the original values and some values following either a normal distribution or a uniform distribution, we only require 5% of the data to detect potential data manipulation.


Bibtex:
@mastersThesis{, AUTHOR = {Lu Yang}, TITLE = {Benfordís Law and Fraud Detection}, SCHOOL = {Williams College}, YEAR = {2014}, TYPE = {Undergraduate Honors Thesis}, URL = {https://web.williams.edu/Mathematics/sjmiller/public_html/math/papers/st/YangLu.pdf}, NOTE = {last accessed December 8, 2019}, }


Reference Type: Thesis

Subject Area(s): Accounting, Statistics