Technology In Auditing Using Benford's Law
Technology in Auditing Using Benford's Law
What started out as a curious observation by an astronomer in 1881 has the potential to have a significant impact on the audit profession 125 years later. In 1881, the astronomer "Simon Newcomb noticed that the front pages of his logarithmic tables frayed faster than the rest of the pagesÂ…". Newcomb concluded "the first digit is oftener 1 than any other digit". Newcomb quantified the probability of the occurrence of the different digits as being the first digit and as well as the second digit. For the most part, Newcomb just considered it a curiosity and left it at that. (Caldwell 2004)
In the 1920's, a physicist at the GE Research Laboratories, Frank Benford, thought it more than a curiosity and conducted extensive testing of naturally occurring data and computed the expected frequencies of the digits. In Table 1, there is a table of these expected frequencies for the first four positions. Benford also determined that the data......
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Approximate Word Count: 1547
Approximate Pages: 7 (250 words per double-spaced page)
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