Testing for the Benford Property

Benford’s Law says that many naturally occurring sets of observations follow a certain logarithmic law. Relative frequencies of the first significant digits k are log(1 + 1/k) for k = 1, 2, ..., 9, where the base of the logarithm is ten. Financial and other auditors routinely check data sets against this law in order to investigate for fraud. We present the principal underlying mechanism that produces sets of numbers with the Benford property. Examples in which each observation consists of a product of variables are given. Two standard statistical tests that are useful for testing compliance with Benford’s Law are outlined. A new Minitab macro, which implements both statistical tests and produces a graphical output, is presented. 10 Copyright © SIAM Unauthorized reproduction of this article is prohibited