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Moore, GB and Benjamin, CO (2004)

Using Benford's Law for fraud detection

Internal Auditing 19(1), 4-9.

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



Abstract: ABSTRACT: An overview of Benford's Law is provided and a methodology for its application in fraud detection is proposed. A case study is used to illustrate the application of digital analysis using Benford's Law via a financial review of a small chemical manufacturing plant: digital analysis facilitated fraud detection by enabling the speedy identification of suspicious purchasing transactions and resulted in the discovery and termination of fraudulent activities. Benford's Law is a theory of statistical probability that establishes the expected frequency of numbers that appear in a database. Where there are built-in biases, the data will not conform to Benford's Law. A general approach to utilizing digital analysis using Benford's Law for fraud detection is summarized in a flowchart. Digital analysis is best implemented as part of a more comprehensive approach to fraud detection involving inter alia training in ethics, the implementation of a hotline, a well-trained audit department, a profile of potential frauds to be tested, and the use of outside specialists to complement the internal resources


Bibtex:
@article {, AUTHOR = {Moore, Gordon B. AND Benjamin, Colin O.}, TITLE = {Using Benford's Law for fraud detection}, JOURNAL = {Internal Auditing}, YEAR = {2004}, VOLUME = {19}, NUMBER = {1}, PAGES = {4--9}, }


Reference Type: Journal Article

Subject Area(s): Accounting