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Severe testing of Benford’s law

Author

Listed:
  • Roy Cerqueti

    (La Sapienza University of Rome
    Université d’Angers)

  • Claudio Lupi

    (University of Molise)

Abstract

Benford’s law is often used to support critical decisions related to data quality or the presence of data manipulations or even fraud in large datasets. However, many authors argue that conventional statistical tests will reject the null of data “Benford-ness” if applied in samples of the typical size in this kind of applications, even in the presence of tiny and practically unimportant deviations from Benford’s law. Therefore, they suggest using alternative criteria that, however, lack solid statistical foundations. This paper contributes to the debate on the “large n” (or “excess power”) problem in the context of Benford’s law testing. This issue is discussed in relation with the notion of severity testing for goodness-of-fit tests, with a specific focus on tests for conformity with Benford’s law. To do so, we also derive the asymptotic distribution of the mean absolute deviation (MAD) statistic as well as an asymptotic standard normal test. Finally, the severity testing principle is applied to six controversial large datasets to assess their “Benford-ness”.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:testjl:v:32:y:2023:i:2:d:10.1007_s11749-023-00848-z
    DOI: 10.1007/s11749-023-00848-z
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    References listed on IDEAS

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    1. Fewster, R. M., 2009. "A Simple Explanation of Benford's Law," The American Statistician, American Statistical Association, vol. 63(1), pages 26-32.
    2. C. W. J. Granger, 1998. "Extracting information from mega‐panels and high‐frequency data," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 52(3), pages 258-272, November.
    3. Roy Cerqueti & Claudio Lupi, 2021. "Some New Tests of Conformity with Benford’s Law," Stats, MDPI, vol. 4(3), pages 1-17, September.
    4. Druică, Elena & Oancea, Bogdan & Vâlsan, Călin, 2018. "Benford's law and the limits of digit analysis," International Journal of Accounting Information Systems, Elsevier, vol. 31(C), pages 75-82.
    5. Sitsofe Tsagbey & Miguel de Carvalho & Garritt L. Page, 2017. "All Data are Wrong, but Some are Useful? Advocating the Need for Data Auditing," The American Statistician, Taylor & Francis Journals, vol. 71(3), pages 231-235, July.
    6. Micha Kaiser, 2019. "Benford'S Law As An Indicator Of Survey Reliability—Can We Trust Our Data?," Journal of Economic Surveys, Wiley Blackwell, vol. 33(5), pages 1602-1618, December.
    7. Tam Cho, Wendy K. & Gaines, Brian J., 2007. "Breaking the (Benford) Law: Statistical Fraud Detection in Campaign Finance," The American Statistician, American Statistical Association, vol. 61, pages 218-223, August.
    8. Block, Henry W. & Savits, Thomas H., 2010. "A General Example for Benford Data," The American Statistician, American Statistical Association, vol. 64(4), pages 335-339.
    9. 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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    Cited by:

    1. 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).
    2. Adriano Silva & Sergio Floquet & Ricardo Lima, 2023. "Newcomb–Benford’s Law in Neuromuscular Transmission: Validation in Hyperkalemic Conditions," Stats, MDPI, vol. 6(4), pages 1-19, October.

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