Benford Law: A Fraud Detection Tool Under Financial Numbers Game: A Literature Review
Abstract
The research aims to define the role of Benford's Law, how it is used, the nature of its digital analysis, its role in detecting the manipulation of financial numbers in the financial records and statements of companies, as well as the most important studies that dealt with the subject of the research, as well as dealing with the importance of this tool is one of the judicial accounting tools In detecting fraud, and the most important findings of studies in this regard, and from our analysis of previous studies, it was found that the Benford Law is an important means in detecting fraud and should focus on it in multiple operations, including detecting fraud in income in joint-stock companies, Likewise, Manipulation with instruments, sales, and other financial items. however, this law is also considered a statistical method for auditors that can be relied upon to perform their work.
References
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Benford, F. (1938). The law of anomalous numbers. Proceedings of the American philosophical society, 551-572.
Carslaw, Charles A. P, N, (1988),”Anomalies in Income Numbers: Evidence of Goal Oriented Behavior”, THE Accounting review, Vol. LXm, No.(2), , p:321-327.
Flayyih, H. H., (2013). Using Benford Law in Detecting Earnings Management and its Reflection on the audit quality : In application on a sample of listed companies in the Iraq stock Exchange. Master Thesis, College of Administration and Economics, University of Baghdad.
Flayyih, H. H., Salih, J. I., Rahma, N. G. A., & Mohammed, Y. N. (2020). Earnings Management between the fact of manipulation and credibility of management procedures: a literature review. Social Science and Humanities Journal, 1898-1908.
Fudenberg, D., & Tirole, J. (1995). A theory of income & dividend smoothing based on incumbency rents. Journal of Political economy, 103(1), 75-93.
Hill, T. P. (1995). Base-invariance implies Benford’s law. Proceedings of the American Mathematical Society, 123(3), 887-895.
Johnson , Gary C. , (2009), “Using Benford’s Law to Determine if Selected Company Characteristics are Red Flags for Earnings Management” , Journal of Forensic Studies in Accounting and Business, p:39-65 .
Jordan, Charles E. and Clark, Stanley J ,(2011), “, Detecting Cosmetic Earnings Management Using Benford s Law” , The CPA Journal, vol.LXXXI / No(2),P:32-37 .
Mohammed, B. H., Flayyih, H. H., Mohammed, Y. N., & Abbood, H. Q. (2019). The effect of audit committee characteristics and firm financial performance: An empirical study of listed companies in Iraq stock exchange. Journal of Engineering and Applied Science, 14(4), 4919-4926.
Newcomb, simon ,(1881), “ Note on The frequency of use of different digits in natural numbers” , journal American mathematic. Vol. (4), No.(1/2), ,P:39-40,.
Nigrini, M. J., & Miller, S. J. (2009). Data diagnostics using second-order tests of Benford's law. Auditing: A Journal of Practice & Theory, 28(2), 305-324.
Nigrini, M. J., & Mittermaier, L. J. (1997). The use of Benford's law as an aid in analytical procedures. Auditing, 16(2), 52.
Nigrini, M. J., & Wells, J. T. (2012). Benford’s Law: Application for Forensic Accounting. Auditing & Fraud
Pinkham, R. S. (1961). On the distribution of first significant digits. The Annals of Mathematical Statistics, 32(4), 1223-1230.
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial accounting theory and analysis: text and cases. John Wiley & Sons.
Scott, W. R., & O'Brien, P. C. (2003). Financial accounting theory (Vol. 3). Toronto: prentice hall.
Singleton, T. W. (2011). IT Audit Basics: Understanding and Applying Benford's Law. Isaca Journal, 3, 6.
Talab, H. R., Flayyih, H. H., & Ali, S. I. (2018). Role of Beneish M-score model in Detecting of Earnings Management Practices: Empirical Study in listed banks of Iraqi Stock Exchange. international journal of Applied Business and Economic Research. 16. International Journal of Applied Business and Economic Research, 16.
Tamimi, A. H., & Flayyih, H. H. (2017). The effects of Governance on the financial reporting quality of state-owned companies. In 8th international scientific conference, college of business and administrative.
Thomas, J. K.,(1989),“ Unusual patterns in reported earnings" , “The Accounting Review, Vol. LXIV, No. (4), ,P:73-787.
Benford, F. (1938). The law of anomalous numbers. Proceedings of the American philosophical society, 551-572.
Carslaw, Charles A. P, N, (1988),”Anomalies in Income Numbers: Evidence of Goal Oriented Behavior”, THE Accounting review, Vol. LXm, No.(2), , p:321-327.
Flayyih, H. H., (2013). Using Benford Law in Detecting Earnings Management and its Reflection on the audit quality : In application on a sample of listed companies in the Iraq stock Exchange. Master Thesis, College of Administration and Economics, University of Baghdad.
Flayyih, H. H., Salih, J. I., Rahma, N. G. A., & Mohammed, Y. N. (2020). Earnings Management between the fact of manipulation and credibility of management procedures: a literature review. Social Science and Humanities Journal, 1898-1908.
Fudenberg, D., & Tirole, J. (1995). A theory of income & dividend smoothing based on incumbency rents. Journal of Political economy, 103(1), 75-93.
Hill, T. P. (1995). Base-invariance implies Benford’s law. Proceedings of the American Mathematical Society, 123(3), 887-895.
Johnson , Gary C. , (2009), “Using Benford’s Law to Determine if Selected Company Characteristics are Red Flags for Earnings Management” , Journal of Forensic Studies in Accounting and Business, p:39-65 .
Jordan, Charles E. and Clark, Stanley J ,(2011), “, Detecting Cosmetic Earnings Management Using Benford s Law” , The CPA Journal, vol.LXXXI / No(2),P:32-37 .
Mohammed, B. H., Flayyih, H. H., Mohammed, Y. N., & Abbood, H. Q. (2019). The effect of audit committee characteristics and firm financial performance: An empirical study of listed companies in Iraq stock exchange. Journal of Engineering and Applied Science, 14(4), 4919-4926.
Newcomb, simon ,(1881), “ Note on The frequency of use of different digits in natural numbers” , journal American mathematic. Vol. (4), No.(1/2), ,P:39-40,.
Nigrini, M. J., & Miller, S. J. (2009). Data diagnostics using second-order tests of Benford's law. Auditing: A Journal of Practice & Theory, 28(2), 305-324.
Nigrini, M. J., & Mittermaier, L. J. (1997). The use of Benford's law as an aid in analytical procedures. Auditing, 16(2), 52.
Nigrini, M. J., & Wells, J. T. (2012). Benford’s Law: Application for Forensic Accounting. Auditing & Fraud
Pinkham, R. S. (1961). On the distribution of first significant digits. The Annals of Mathematical Statistics, 32(4), 1223-1230.
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial accounting theory and analysis: text and cases. John Wiley & Sons.
Scott, W. R., & O'Brien, P. C. (2003). Financial accounting theory (Vol. 3). Toronto: prentice hall.
Singleton, T. W. (2011). IT Audit Basics: Understanding and Applying Benford's Law. Isaca Journal, 3, 6.
Talab, H. R., Flayyih, H. H., & Ali, S. I. (2018). Role of Beneish M-score model in Detecting of Earnings Management Practices: Empirical Study in listed banks of Iraqi Stock Exchange. international journal of Applied Business and Economic Research. 16. International Journal of Applied Business and Economic Research, 16.
Tamimi, A. H., & Flayyih, H. H. (2017). The effects of Governance on the financial reporting quality of state-owned companies. In 8th international scientific conference, college of business and administrative.
Thomas, J. K.,(1989),“ Unusual patterns in reported earnings" , “The Accounting Review, Vol. LXIV, No. (4), ,P:73-787.