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A Benford’s Law view of inspections’ reasonability

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  • Arezzo, Maria Felice
  • Cerqueti, Roy

Abstract

Beyond offering room for methodological research, the assessment of data regularities has relevant implications for applications. In this respect, Benford’s Law represents one of the key instruments to detect the presence of possible data manipulation. This paper contributes to this debate by dealing with the analysis of the labour inspections’ reliability through an econophysic approach. Specifically, we check the validity of the Benford’s Law for a large set of Italian firms’ balance sheets and income statements, in both cases of firms inspected and not inspected by the National Institute of Social Security and for all the Italian regions. In so doing, we provide a panoramic view of the plausibility of the inspection activities at a regional and financial item level.

Suggested Citation

  • Arezzo, Maria Felice & Cerqueti, Roy, 2023. "A Benford’s Law view of inspections’ reasonability," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 632(P1).
    • Handle: RePEc:eee:phsmap:v:632:y:2023:i:p1:s037843712300849x
    DOI: 10.1016/j.physa.2023.129294
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    References listed on IDEAS

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    1. Herteliu, Claudiu & Jianu, Ionel & Dragan, Irina Maria & Apostu, Simona & Luchian, Iuliana, 2021. "Testing Benford’s Laws (non)conformity within disclosed companies’ financial statements among hospitality industry in Romania," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 582(C).
    2. Deckert, Joseph & Myagkov, Mikhail & Ordeshook, Peter C., 2011. "Benford's Law and the Detection of Election Fraud," Political Analysis, Cambridge University Press, vol. 19(3), pages 245-268, July.
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    4. Roy Cerqueti & Claudio Lupi, 2023. "Severe testing of Benford’s law," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 32(2), pages 677-694, June.
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    10. Alex Ely Kossovsky, 2021. "On the Mistaken Use of the Chi-Square Test in Benford’s Law," Stats, MDPI, vol. 4(2), pages 1-35, May.
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    12. Ausloos, Marcel & Cerqueti, Roy & Lupi, Claudio, 2017. "Long-range properties and data validity for hydrogeological time series: The case of the Paglia river," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 470(C), pages 39-50.
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    14. Riccioni, Jessica & Cerqueti, Roy, 2018. "Regular paths in financial markets: Investigating the Benford's law," Chaos, Solitons & Fractals, Elsevier, vol. 107(C), pages 186-194.
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