Chapter 7
Benford's Law, and Yes—Even Statistics
This book would not be complete without a chapter devoted to the use of Benford's Law and the use of statistics in analyzing financial statement information, and interpreting the results of these techniques without having an advanced educational degree in mathematics or statistics. There are many articles and books written on Benford's Law and its use, not only in auditing, but in financial forensics as well. In addition, there are many articles and books written on the use of statistics in business applications, from evaluating portfolios and investments to managing operations and even auditing and forensic accounting applications. Some of the more common statistical applications used in this chapter include correlation and regression analysis, Z-score tests, and descriptive statistics. Even basic data analyses, such as checking for duplicate numbers or gaps in numbers, are simple tools available to financial forensic examiners. Covering all types of statistical tests, along with detailed study of Benford's Law, is not within the scope of this chapter, but the financial forensic examiner needs to be aware that there are multiple other statistical tools available to assist in financial forensic examinations, along with additional information relating to the opportunities of using Benford's Law in financial forensic examinations. While these techniques generally dissect the detailed financial information that makes up a financial ...
