Acta Oeconomica
Volume/Issue:
Volume 69: Issue 2
Fraud Detection in Financial Statements Applying Benford's Law with Monte Carlo Simulation
Authors: Vladan Pavlović 1 , Goranka Knežević 1 , Marijana Joksimović 1 , and Dušan Joksimović 1
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  • 1 University of Pristina, Kosovska Mitrovica, Serbia
  • 2 Singidunum University, Belgrade, Serbia
  • 3 Megatrend University, Belgrade, Serbia
  • 4 Academy of Criminal Investigation and Police Studies, Belgrade, Serbia
DOI:
https://doi.org/10.1556/032.2019.69.2.4
Page Count:
217–239
Publication Date:
01 Jun 2019
Online Publication Date:
Jun 2019
Article Category:
Research Article
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Benford's Law is a useful tool for detecting fraud in financial statements. In this paper we test the financial item named ‘Work performed by the undertaking for its own purpose and capitalised’ applying this tool. The data are taken from the financial reports of all companies submitted to the Serbian Business Register Agency for the period of 2008–2013. Our conclusion shows that there is a very high probability that the frequency distribution of the second digit does not satisfy Benford's Law. In other words, it implies that certain manipulations have been usually done with the second digit of the aforementioned item in the financial statement. This research confirms our hypothesis that financial statement frauds are usually conducted using the second digit.

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Cover Acta Oeconomica
Acta Oeconomica Periodical of the Hungarian Academy of Sciences
Print ISSN:
0001-6373
Online ISSN:
1588-2659
Keywords:
Benford's Law; income statement; auditing; financial fraud; Monte Carlo simulation

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