Detecting Anomalies by Benford´s Law

Benford´s law gives expected patterns of the digits in numerical data. It can be used as a tool to detect outliers for example in as a test for the authenticity and reliability of transaction level accounting data. Based on Benford´s law tests for first two digits, first three digits, last digits, last digit, last two digits have been derived as an additional analytical tool. Benford´s law is known as a ´first digit law´, ´digit analysis´ or ´Benford-Newcomb phenomenon´. The second order test is an analysis of the digit frequencies of the differences between the ordered (ranked) values in a data set. The digit frequencies of these differences approximates the frequencies of Benford´s law for most distributions of the original data. From some auditor´s point of view it is very important if it is possible to use Benford´s law to trace siginificant changes in data in some period of time or detect some trends within them.