The finding was error-related in that the inventory in three large sections of the warehouse was included twice on the inventory count sheets. The double count would have materially overstated earnings. Benford's Law provides auditors with the expected digit frequencies in tabulated data. By examining the digit and the number frequencies, auditors can gain data insights that might be missed using traditional analytical procedures and sampling methods. The digit and number patterns could point to number invention, systematic frauds, data errors, or biases in the data.
Research is currently underway on advanced tests to detect anomalies in data subsets.
Current research also addresses how auditors could use the digit and number patterns to test whether the output from new computer systems and Y2K conversions has passed a reasonableness test. All rights reserved. Reproduction in whole or in part in any form or medium without the express written permission of The IIA is strictly prohibited.