Why does Benford’s Law work? This law says numbers in a data set are more likely to start with low digits (1, 2) than high digits (8, 9), but there are exactly as many numbers in existence beginning with each digit.

Question

Why does Benford’s Law work? This law says numbers in a data set are more likely to start with low digits (1, 2) than high digits (8, 9), but there are exactly as many numbers in existence beginning with each digit.

In: Mathematics

Answer 1

We used this as an auditing tool as many companies have financial policies of dual signatures on checks over a specific amount, say $10,000. So, we would use benford’s law to see if there was an abnormally high number of checks with 9 as their first digit. If so, it would indicate that employees were circumventing the financial policy to avoid other people approving certain checks.