Benford
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School
Central Michigan University *
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Course
370S
Subject
Accounting
Date
Jan 9, 2024
Type
docx
Pages
2
Uploaded by ChiefSardine894
Question 1:
Make a snip of the first digit test chart and paste it into your Word document.
From looking at the chart, does the salary data fit the Benford frequencies?
Are there any digits that deviate from the Benford distribution?
What level
of risk do you see in the data—high, medium or low?
-
For the most part I think the chart demonstrates Benfords law pretty
well.
The digit 9, is the one that kind of throws off the data. I would
say that the risk is low to medium in this case.
Question 2:
Now delete any previous values in sheet 1 and enter 50 made-up numbers by
keying in numbers from the keypad (numbers must be at least two digits).
If
you prefer, you may use a function to generate random numbers.
Run the
Benford analysis macro again and paste a snip of sheet 2 (the first digit test)
into your word document.
Can you tell the numbers are made up?
Do they
match a Benford distribution?
If you were an auditor and you received these
numbers from a client, how would you rate the inherent risk that these
numbers are invalid?
Do you think Benford’s law can help auditors spot risk
in accounting data?
1
You can definitely tell the numbers are made up in this case as they do not
follow the distribution at all. I would say the risk is pretty high that these
numbers are not valid. I think Benford’s law can be super helpful in spotting
risk in accounting data as long as the fraudulent actions were not
strategically done to avoid suspicion.
2
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