Download Benford's Law: Applications for Forensic Accounting, by Mark Nigrini, Joseph T. Wells PDF

By Mark Nigrini, Joseph T. Wells

A strong new software for all forensic accountants, or a person who analyzes information that can were altered

Benford's legislation offers the anticipated styles of the digits within the numbers in tabulated information reminiscent of city and town populations or Madoff's fictitious portfolio returns. these digits, in unaltered information, won't happen in equivalent proportions; there's a huge bias in the direction of the reduce digits, quite a bit in order that approximately one-half of all numbers are anticipated firstly the digits 1 or 2. those styles have been initially came across by means of physicist Frank Benford within the early Thirties, and feature seeing that been discovered to use to all tabulated facts. Mark J. Nigrini has been a pioneer in employing Benford's legislations to auditing and forensic accounting, even earlier than his groundbreaking 1999 magazine of Accountancy article introducing this beneficial device to the accounting global. In Benford's legislations, Nigrini indicates the frequent applicability of Benford's legislations and its functional makes use of to observe fraud, error, and different anomalies.

  • Explores basic, linked, and complicated checks, all defined with information units that come with company funds info and election data
  • Includes ten fraud detection reports, together with seller fraud, payroll fraud, due diligence whilst paying for a enterprise, and tax evasion
  • Covers financial plan fraud, with information from Enron, AIG, and firms that have been the objective of hedge fund brief sales
  • Looks at the best way to notice Ponzi schemes, together with facts on Madoff, Waxenberg, and more
  • Examines many different functions, from the Clinton tax returns and the charitable presents of Lehman Brothers to tax evasion and quantity invention

Benford's Law has 250 figures and makes use of 50 attention-grabbing actual and fraudulent real-world information units to give an explanation for either conception and perform, and concludes with an schedule and instructions for destiny learn. The spouse web site provides more information and assets.

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Extra resources for Benford's Law: Applications for Forensic Accounting, Auditing, and Fraud Detection

Example text

Benford’s Law is a limiting distribution, and the underlying calculus assumes that we have reasonably large numbers. It is not clear how large our numbers have to be to be reasonably large. Benford’s Law assumes that each numeric amount has “many” digits. I have found that conformity to Benford’s Law requires that we have a large data table with numbers that have at least four digits. Simulations have shown that the numbers should have four or more digits for a good fit. However, if this requirement is violated, the whole ship does not sink.

276. 724. 974, which makes the Column H mantissas uniformly distributed and very close to the original set of mantissas. 6 results are universal in that if the numbers in Column C are multiplied by any nonzero constant, our results will be a Benford Set and the mantissas of those numbers will be uniformly distributed. Our results will “improve” as N, the number of records, is increased. 001), the digit patterns will be only slightly disturbed. 999), the digit patterns will also be only slightly disturbed.

For tables with fewer than 1,000 records, the Benford-related tests still can be run, but we should be willing to live with larger deviations from the Benford’s Law line before concluding that the data did not conform to the law. New York Stock Exchange stock volumes data on 3,000 companies had a close conformity to Benford’s Law and census data on 3,141 county populations also had a very good fit to the law. With 3,000 records, we should have a good fit for data that conforms to the assumptions of Benford’s Law.

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