How to throw off forensic accountants…

By XeroCube | October 26, 2010

Think you are good at cooking your books? Cheating with numbers? Tweaking the bias of your graphs? Then you might want to read about Benford’s Law and what it means to analysts. For me, it’s not that useful, as I don’t do accounting, nor do I frequently provide charts in a sales perspective. However, I did find this to be an interesting read, as I am a math enthusiast. I’ve provided a snippet of the article below, but encourage to hit the jump to read the full post.

How to cheat with Frank Benford | SHIFT_beep

Pick a number at random from the universe. Not just from inside your head. Open a page of the financial times or look up the size of a planet; convert you height to cubits or measure the weight of your favourite book. Something like that.

Don’t actually do it, it’s hypothetical. But ask yourself a question. What are the chances of that number starting with a 1? What are the chances or it starting with a 7? What are the chances of it starting with any particular one of the 9 possible starting digits (1, 2, 3, 4, 5, 6, 7, 8 or 9. We’re not counting 0, as in 0.5 because it’s not the first significant digit.)?

Well you’re choosing at random so the chance of your number starting with any one of those 9 digits must be 1 in 9. That’s about 11%.

The surprising result of Frank Benford’s work is that the number you just plucked from the universe is far more likely to start with a 1 (about 30.1%) and very unlikely to start with a 9 (about 4.6%). And there’s a sliding scale for the digits in between.

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