Forensic accounting: the use of Benford's law to evaluate indications of fraud
DOI:
https://doi.org/10.23925/2446-9513.2022v9id57343Keywords:
Fraud DetectionAbstract
The sudden decline in profit at PII Corporation is an important issue that requires further discussion. This study aims to evince whether there are indications of fraud in the preparation of PII Corporation's profit and loss statements, which can be proven through Benford's Law. This study uses the Binomial Test, Sign Test, and Chi-Squared Test methods to test the alignment of data with Benford's Law. The sample in this study consists of PII Corporation's 2013-2019 profit and loss reports. The results have shown that 25 out of 28 tests expressed no indication of fraud, while 3 tests have indicated fraud, detected in the fourth digit of the company's expenses, in the first 2 digits of its expenses, and in the last 2 digits of other incomes and costs. After further investigation, it was found that the significant decrease in profit occurred because the company had paid interest on bonds with quite large values in 2019, so the statistical test results were considered false-positive. The recommendation that can be given is that PII Corporation regulates the imposition of the bond coupon value in stages.
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