Analysis of Top 500 Central and East European Companies Net Income Using Benford's Law

Mario Žgela, Jasminka Dobša

Abstract


There are numerous useful methods that can be conducted in data analysis in order to check data correctness and authenticity. One of contemporary and efficient methods is application of so-called Benford's Law. In this paper we examine ways of application of this law in investigation of specific net income number set. Our aim is to make a conclusion if this number set conforms to Benford's Law. An examination target focus is set on values of top 500 central and east European companies according to their income. Data set contains 1,500 records and spans through 3 years (2007, 2008 and 2009) including 500 net incomes per year. Research is based on net income profit and loss subsets as well as absolute values of net income. Analysis covers first digit Benford's Law test and proves conformance to Benford's Law of all observed subsets.


Keywords


Benford's Law; first digit test; net income values analysis; data auditing

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Journal of Information and Organizational Sciences (Online)
ISSN 1846-9418 (online)
ISSN 1846-3312 (print)