International Journal of Voluntary and Nonprofit Organizations 27(6), pp. 2685–2708.
ISSN/ISBN: Not available at this time. DOI: 10.1007/s11266-015-9629-4
Abstract: In order to assess the accuracy of the figures reported in NPOs’ financial statements, I perform a digital analysis on Belgian non-profit organizations’ financial statements for accounting years 2007 up to 2012. Specifically, I compare observed frequencies for digits in the second-from-the-left position with expected frequencies based on Benford’s Law. Results based on the full sample indicate that observed frequencies strongly conform to Benford’s Law (and thus suggest a high degree of accuracy of the figures reported in NPOs’ financial statements). Nevertheless, I note statistically significant deviations from Benford’s Law (both for the entire distribution and at the individual digit level). The largest deviation is noted for zeroes in the second position (i.e., a significantly positive deviation), which can be explained based on humans’ reliance upon so-called cognitive reference points. Considering different sub-samples, I note that observed deviations from Benford’s Law are largest for the smallest non-profits and those non-profits that rely most heavily on grants and/or donations.
Bibtex:
@article{,
author = {Van Caneghem, Tom},
year = {2016},
pages = {2685–-2708,
title = {{NPO} Financial Statement Quality: An Empirical Analysis Based on {Benford's Law}},
journal = {{VOLUNTAS}: International Journal of Voluntary and Nonprofit Organizations},
volume = {27},
number = {6},
doi = {10.1007/s11266-015-9629-4}
}
Reference Type: Journal Article
Subject Area(s): Accounting, Economics