Using Benford Analysis to Detect Fraud

Internal Auditing, Vol. 27, No. 3 (May 2012): 24-29

6 Pages Posted: 18 Jul 2012 Last revised: 28 Mar 2017

See all articles by Clyde Stambaugh

Clyde Stambaugh

Murray State University - Accounting Department

Manuel A. Tipgos

Indiana University Southeast

Floyd Carpenter

Murray State University, College of Business, Accounting Department (Deceased)

Murphy Smith

Texas A&M University-Corpus Christi-Department of Accounting

Abstract

Accountants, especially internal auditors, external auditors, and forensic accountants, are often called upon to help in efforts to detect and prevent fraud. A variety of methods have been developed to assist in fraud detection and prevention. This article describes a fraud-detection strategy based on Benford’s Law. Benford’s Law analysis is a mathematical technique for identifying irregular patterns in data, which might represent red flags that indicate fraudulent activity or material errors. By using the Benford Analysis Workbook that is described in this paper (and available online), internal auditors, external auditors, forensic accountants, and others can readily perform this effective test to help identify possible fraud- or error-infested accounts.

Keywords: internal auditing, Benford analysis, forensic accounting, fraud detection

JEL Classification: M41

Suggested Citation

Stambaugh, Clyde and Tipgos, Manuel A. and Carpenter, Floyd and Smith, Murphy, Using Benford Analysis to Detect Fraud. Internal Auditing, Vol. 27, No. 3 (May 2012): 24-29. Available at SSRN: https://ssrn.com/abstract=2111653

Clyde Stambaugh

Murray State University - Accounting Department

Murray, KY 42071-3314
United States

Manuel A. Tipgos

Indiana University Southeast ( email )

New Albany, IN 47150
United States

Floyd Carpenter

Murray State University, College of Business, Accounting Department (Deceased)

Murray, KY 42071-3314
United States

Murphy Smith (Contact Author)

Texas A&M University-Corpus Christi-Department of Accounting ( email )

6300 Ocean Dr
Corpus Christi, TX 78412
United States

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