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January 14, 2007 by Mike.Blakley.
This example explains how to perform a simple, yet effective, test to determine if a data range in Excel conforms with that expected under Benford’s law. The example data used is that provided in the Excel data sheet provided in the 26th annual report to Congress. This is an audit test that should take no more than a few minutes, yet provides a good test of fit for the numbers in the range, and potentially an easy test for possible fraud or made-up data. The step-by-step procedure is detailed. The example provided is the test of the first digit. Further tests of Benford’s law, such as the first 2 or 3 digits, the last 1 or 2 digits or the second digit, can be performed using EZ-R Stats for Windows (no cost). For the curious, there is an Excel workbook with all the formulae…
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