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Kim, H (2019)

Financial Statements Errors in Japanese Firms : Using a Benfordʼs Law

The Journal of Tokyo Keizai University: Business 302, pp. 19-42.

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

Note - this is a foreign language paper: JPN

Abstract: The purpose of this paper is to measure Japanese financial statement errors and analyze the factors that affect it. We use Benford's Law in this paper to measure financial statement errors. Benford's law is a mathematical theory that shows that numbers in nature appear with a certain probability. In this paper, we analyze the numbers in the first digit of accounts in the financial statements, and consider that the error is higher as the actual appearance frequency is farther from the theoretical value. An analysis using 70,607 samples of general operating companies, for which both non-consolidated and consolidated financial statements were available during the period from 1983 to 2015, showed the following. First, about 94.5% of the analysis samples make financial statements in accordance with Benford's law. Second, the larger the number of subsidiaries and the more foreign subsidiaries, the greater the error in consolidated financial statements, but the greater the number of non-controlling interests, the smaller the error in consolidated financial statements. Second, the more internal transactions, the greater the errors in the non-consolidated financial statements, but the impact on the consolidated financial statements is not seen. Third, the more companies that make profit adjustments and the more loss companies, the greater the error in financial statements. Fourth, after the accounting big bang, errors in the consolidated balance sheet decreased, but those in the consolidated income statement increased. This paper focuses on errors in the financial statements of individual companies and compares and analyzes errors in non-consolidated financial statements and consolidated financial statements over a long period of more than 30 years. Provide insightful findings.

@article{, author="Kim, Hyonok", title="Financial Statements Errors in Japanese Firms : Using a Benfordʼs Law", journal="The Journal of Tokyo Keizai University : Business", ISSN="1348-6411", year="2019", month="feb", volume="", number="302", pages="19--42", URL="", DOI="", }

Reference Type: Journal Article

Subject Area(s): Accounting