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Welcome to Module 8. Please read the following regarding Benford’s Law. Have a good week. Dr. Miller
Who knew that Frank Benford’s number theory would turn out to be such a valuable tool for CFEs? Benford, an electrical engineer at General Electric in the 1930s, rediscovered the importance of the frequency of the first digit in a set of nonrandom numbers.
In the 1880s, astronomer Simon Newcomb, who used tables from logarithm books to multiply large numbers, noticed that the earlier pages of his tables – the pages containing the lower digits one, two, and three – were more worn than the pages with the higher numbers seven, eight, and nine. He thought that was an interesting observation and published a paper on it.
Benford carried the principle further. He said that in a set of data more of the numbers begin with a one, two, or three than with a seven, eight, or nine. This is counterintuitive; most people think the leading digits in a data set are equally likely to begin with a one as with a nine. Benford proved this isn’t true, and the result – Benford’s Law – has been the downfall of fraudsters and a boon to fraud examiners.
THE SOLOMON ISLANDS AND 342 PEOPLE
Benford’s Law, sometimes called the first-digit law, is expressed in this formula:
P(d) = logb (d + 1) – logb (d) = logb (1 + 1/d)
After testing several thousand data sets – such as utility bills from the Solomon Islands, street addresses of the first 342 people listed in the book “American Men of Science,” and the populations of American cities – Benford found that the first digits followed a definite pattern. That is, the first digit is a one almost one-third of the time, a two appears 18 percent, a three 12 percent, and so on until you get to the larger digits, which occur much less frequently; a nine appears less than 5 percent of the time.
It was an interesting observation, but it took several decades to find a truly practical application. In the 1990s, Mark Nigrini, Ph.D., a college professor, came up with a practical fraud application. Nigrini reviewed sales figures, insurance claim costs, and expense reimbursement claims and did studies on detecting overstatements and understatement of financial figure.
Nellie Jones
Nellie Jones
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Oct 30 at 4:56pm
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I have attached my final paper!
3Whistleblower Suit Targets Medical Product Firm_Edited (4).docx

Please review the following article located in the school library and discuss how Benford’s law can apply based on the kick off posting. Use the school library for research.
Rancho santa fe couple sentenced to prison for roles in concealing $1.5 million in bankruptcy assets, evading $6 million in taxes and committing bank fraud. (2018, Apr 09). Targeted News Service Retrieved from https://csuglobal.idm.oclc.org/login?url=https://search-proquest-com.csuglobal.idm.oclc.org/docview/2023666942?accountid=38569

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