Benford's Law: Analyzing a Decade of Financial Data

Authors

Fatima A. Alali, California State University Fullerton
Silvia Romero, Montclair State UniversityFollow

Document Type

Article

Publication Date

1-1-2013

Journal / Book Title

Journal of Emerging Technologies in Accounting

Abstract

This study uses a decade of financial accounting data to examine if and how they depart from Benford's Law. Using a large sample of U.S. public companies, we conduct an analysis of the first-two digits of data items generally used in research to measure total accruals and discretionary accruals and where fraud, restatements, and enforcement actions are revealed. We break down a decade of data into six subperiods; pre-SOX Period (2001), SOX 1 Period (2002-2003), SOX 2 Period (2004-2006), SOX 3 Period (2007), Crisis 1 Period (2008), and Crisis 2 Period (2009-2010). We find different indicators of manipulation during the periods studied, as well as differences between small and big companies and companies audited by Big 4 and non-Big 4 firms.

DOI

10.2308/jeta-50749

MSU Digital Commons Citation

Alali, Fatima A. and Romero, Silvia, "Benford's Law: Analyzing a Decade of Financial Data" (2013). Department of Accounting and Finance Faculty Scholarship and Creative Works. 33.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/33

Published Citation

Alali, F. A., & Romero, S. (2013). Benford's Law: Analyzing a decade of financial data. Journal of Emerging Technologies in Accounting, 10(1), 1-39.