ABSTRACT
Benford's Law relates to the frequency distribution of leading digits in many sets of numerical data, including utility bills, stock prices, population numbers, lengths of rivers, and other types of large data sets. The phenomenon was again noted in the 1930s by the physicist Frank Benford, who tested it and was credited for it. Benford's Law can be used to detect possible fraud and data manipulation because people who make up figures tend to follow patterns and generally distribute their numbers uniformly. Extensive work in this regard was conducted by Mark Nigrini, who showed that Benford's Law could be used in audit and forensic accounting as a fraud indicator. Benford's Law also makes predictions about the distribution of second, third, and subsequent digits. Benford's Law provides an analytical tool to identify anomalous transactions that internal auditors can investigate further.
