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Benford’s Law As a Useful Tool to Determine Fraud in Financial Statements

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  • Mateja Gorenc

    (International School of Social and Business Studies, Slovenia)

Abstract

Benford’s law is a mathematical tool and a method of determining whether investigated financial statements contain unintentional errors or fraud. Benford’s law says that counterfeit numbers have a slightly different pattern than valid or random samples. Benford’s Law is an effective method and analytical technique to help detect accounting fraud. Motives and causes for fraud can be explained by the fraud triangle, which consists of percieved pressure, perceived opportunities and the ability to justify their actions. Benford’s law is just one of the possible tools used to detect irregularities, which can also be used in the field of data verification in financial statements.

Suggested Citation

  • Mateja Gorenc, 2019. "Benford’s Law As a Useful Tool to Determine Fraud in Financial Statements," Management, University of Primorska, Faculty of Management Koper, vol. 14(1), pages 19-31.
    • Handle: RePEc:mgt:youmng:v:14:y:2019:i:1:p:19-31
    DOI: 10.26493/1854-4231.14.19-31
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    References listed on IDEAS

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    1. Hales, Douglas N. & Chakravorty, Satya S. & Sridharan, V., 2009. "Testing Benford's Law for improving supply chain decision-making: A field experiment," International Journal of Production Economics, Elsevier, vol. 122(2), pages 606-618, December.
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