Benfords

Law
Word count: 1179 words
Candidate Name: Alex Evat Lineekela
Hawala
Candidate Number: 0015
School Number: 001179
Maths Exploration
Windhoek International School

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015

Rationale
I wrote the Math Exploration on Benfords Law as I wanted to find a
statistical concept that could be applied to different aspects of
mathematics. The topic was also chosen to explore what kind of data sets
it could be applied to and also where in can be used in the real world. I
used the Fibonacci sequence as a proof because I wanted to find another
mathematical concept where Benfords Law could be applied. I then used
data from the Namibia Statistics Agency so that I would be able to test the
Law on a random set of data. As for what it could be used for in the real
world, the case of the Arizona Treasury manager was an aspect of
financial forensics that was useful in my investigation. In this investigation
I was able to utilise mathematical concepts such as logarithms and
statistics.

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015

Introduction
Statistics are a part of mathematics that use numerical data in order to
identify trends and patterns. These trends and patterns can be used to
make predictions that can be used to solve problems. An aspect of
statistics that will be discussed in this mathematical investigation is
Benfords law, stated by Frank Benford in 1938. Benfords law refers to the
frequency of the first digit in numbers in many sets of data. Benfords law
states that in a set of data, numbers that have the first digit as 1 will
occur the most. In this mathematical investigation I will first fully explain
the concept of Benfords Law. Afterwards, I will use data from The Namibia
Statistics Agency on Buildings Completed, and Fibonaccis Sequence to
prove Benfords law. I will then provide an example on how the Statistical
law is used in the real world in financial forensics, particularly in the
detection of fraud. From what I have discovered in the Investigation I will
make a sound conclusion regarding Benfords Law.

Background

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
Benfords Law was first stated by Simon Newcomb in 1881, but was
popularized by Frank Benford, who later stated the law in 1938. Bedford
stated the Law after using data sets from numerous sources from the
surface area of rivers,
death rates, and
telephone numbers.
Benford found that the
number of digits that
begin with the number
one occurred around 30%
of the time, with while the
number two occurred 17%
of the time. As the
Figure 1

numbers of the starting

digits increased, the frequency of a number occurring in that number

would decrease, therefore implying that the number of figures starting
with the digit nine would occur much less than that of any other number
in a data set, as opposed to the thought that any number from 1 to 9
would have an equal change of occurring in a set of data. Figure 1
represents the distribution of this data.
Simon Newcomb had calculated this distribution with the formula:
log 10 (

n+1
)
n

Benfords law also has uses in the real world not only as statistical
phenomenon but also as a method of detecting fraud in statistical
forensics. For example, an Arizona bank manager was accused of
committing cheque fraud in 1993. Figure 2 is a list of the transactions
made by the manager.
Under scrutiny one notices that most of the digits begin with an 8 or 9 in
its values. This is the managers first mistake, as his list of transactions
would then have a low correlation towards Benfords Law. Most of the
3

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
values in the data are values closely below
US$ 100 000, which would act as a
threshold for the data. This was probably
because the perpetrator avoided any
transactions underneath the value as it
would have prompted a human signature
instead of the automated transfer using the
Treasurys computer system.
Figure 2

However,

the distribution does not work in this

manner. Humans do not assume that some
numbers more frequently than others, and
assume that numbers would tend to have random frequencies. Figure 3
displays the frequency of the values in the data set.
As shown in the example, Benfords Law can detect the fraudulent
distribution of data in financial statements. However, in the analysis I will
investigate whether it applies to other statistical data and set of data.

Analysis
The Fibonacci sequence will be used as an example of how Benfords Law
applies to any set of data. The Fibonacci sequence is a progressive
sequence that begins with the number zero, followed by one. The third
term is derived from the sum of the two previous terms, 0 and 1, which
would equal 1. The next terms follow this pattern as well, making the
sequence:

{ 0,1,1,2,3,5,8,13,21,34 n } .

The Fibonacci sequence was used to prove Benfords Law in naturally

occurring sequences by calculating the first 200 numbers in the sequence
using Wolfram Alpha, a powerful computational knowledge engine that
can be found on the internet.

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
I then took the numbers from the sequence, and counted how many of
numbers in the sequence began with the digits 1-9 respectfully. I
calculated the frequencies of the data, using my Graphical Display
Calculator as shown in Table 1, which displays the frequencies of the first
digits in the data set.
Number of
occurrences
60
36
25
18
17
12
11
12
9
200

First Digit
1
2
3
4
5
6
7
8
9
Total

Frequency
30.0%
17.5%
12.5%
9.0%
8.5%
6.0%
6.0%
6.0%
4.5%
100%

Table 1

Frequency of the first digits in the Fibonacci sequence

35.0%
30.0%
25.0%
20.0%

100.0% 200.0% 300.0% 400.0% 500.0% 600.0% 700.0% 800.0% 900.0%

30.1%
30.0%
17.6%

Frequecy of first digit

18.0%

15.0%

f(x) = log base 10 (n+1/n)

12.5%
12.5%

10.0%

9.0%

5.0%
0.0%

9.7%

7.9%
8.5%

6.7%

5.8%

6.0%

5.5%

5.1%
6.0%
8

4.6%
4.5%
9

(n) First digit of number

Figure 3
plots the

Figure 3

frequencies with the graph of

f ( x )=log 10(

n+1
)
n

to examine a correlation

between the two.

5

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
The data from the first 200 numbers from the Fibonacci sequence seemed
to follow Benfords Law very closely, proving its usefulness in determining
the distribution in natural mathematical sequences.
I then continued the investigation by using a set of data that has not been
tested against Benfords Law. The data in question is from the Namibia
Statistics Agency, in a report named Monthly Building Report: January
2015. The report contains the indices on Buildings Completed in
Windhoek, Swakopmund, Walvis Bay, and Ongwediva in Namibia from in
the time period of January 2010 to December 2014. It is not disclosed
what values were used to calculate the indices. The report also contained
a composite index calculated from the four towns. The values that will be
used in this section of the mathematical investigation will be the values
from the composite index of the report.

The list of the composite values are shown in Table 3.

Month Inde
x
Jan
47.9
2010
Feb -- 123.
5
Mar
83.7

Mont
h
Jan
2011
Feb --

Inde
x
63.6
68.4

Mont
h
Jan
2012
Feb --

Mar

85.8

Mar

Apr

85

Apr

Apr

May

99.5

May

179.
5
76.3

Jun

125.
6
165.
3
72.7

Jun

160.
7
125.
7
171.

Jun

Jul
Aug

Jul
Aug

May

Jul
Aug

Inde
x
31.6
162.
7
61.2
221.
6
154.
6
259.
1
120.
1
122.

Mont
h
Jan
2013
Feb --

Mont
h
Jan
2014
Feb --

Jul

Inde
x
102.
9
119.
5
176.
8
124.
5
159.
6
139.
7
87.5

Aug

137.

Aug

Mar
Apr
May
Jun

Inde
x
69.7

Mar

145.
1
96.2

Apr

61

May

135.
5
104.
7
316.
4
153.

Jun
Jul

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
6
Sep
120. Sep
237.
7
7
Oct
97.4 Oct
53.2

Sep

Nov

95.2

Nov

Nov

Dec

83.6

Dec

102.
8
100.
1

Oct

Dec

1
120.
1
253.
9
131.
3
83.9

Sep
Oct

3
70.2

Sep
Oct

Nov

108.
4
90.6

Dec

80.3

Dec

Nov

7
134.
8
277.
2
108.
8
107.
5

Table 2

The tally from the composite indices was performed once again. Table 3
shows the frequency of the numbers 1-9 as first digits of the indices
respectively.
First
Digit
1
2
3
4
5
6
7
8
9
Total

Number of occurrences
31
5
1
1
2
5
3
7
5
60

Frequency
51.7%
8.3%
1.7%
1.7%
3.3%
8.3%
5.0%
11.7%
8.3%
100%

Table 3

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
Figure 4 displays the frequencies with the graph of

f ( x )=log 10(

n+1
)
n

to

test the relationship between the two.

Frequency of first digits in Buildings Indices

60.0%
50.0%
40.0%

30.1%
100.0% 200.0% 300.0% 400.0% 500.0% 600.0% 700.0% 800.0% 900.0%
51.7%
17.6%
20.0%
12.5%
9.7%
7.9%
6.7%
5.8%
4.6%
10.0%
5.1%
8.3%
8.3%
8.3%
30.0%

0.0%

1.7%
3

1.7%
4

3.3%
5

7
5.0%

8
11.7%

(n) First Digit of Number

Frequency

Benford's Law

Figure 4

It was found that the values from the NSA did not follow Bensons law as
closely as the values from the Fibonacci sequence. This could be due to
the fact that the values were manipulated via human interaction and
therefore did not correlate with the Law, as the values were not naturally
recorded, and were made up of different values. This may imply that
Benfords law only works with data sets that contain naturally
occurring/recorded numbers. In addition the data used in the investigation
was also altered in the manner that the data was given an indices
threshold of 300, which creates a statistical bias. This bias then has the
effect of neglecting any values over 300.

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015

Conclusion
In conclusion, I found that Benfords Law does not apply to every set of
data, particularly data in which humans had a great influence, such as in
the Namibia Statistics Agency Building Indices. In these cases, a
maximum threshold was created, which created a bias in the data set.
Other causes in the case of the Building Indices was that the values in the
data set were compiled from different values, of which the sources were
not disclosed in the report. However, it was found that the Benford Index
applied to data set composed of natural sequences, such as the Fibonacci
sequence. In addition, in the example of the Arizona Treasury managers
case of fraud in 1993, the Benford Index can also be used to detect fraud
in financial data, as human interference can be easily detected.

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015

List of Sources
Benford, Frank. 1938. "The law of anomalous numbers." Proceedings of
the American Philosophical Society 551572.
Namibia Statistics Agency. 2015.
"http://www.nsa.org.na/files/downloads/187_Building%20Plans.pdf."
Namibia Statistics Agency. February 16.
http://www.nsa.org.na/files/downloads/187_Building%20Plans.pdf.
Newcomb, Simon. 1881. "Note on the frequency of use of the different
digits in natural numbers." American Journal of Mathematics 39-40.
Nigrini, Mark J. 1999. I've Got Your Number. May 1.
http://www.journalofaccountancy.com/issues/1999/may/nigrini.
Weisstien, Eric W. n.d. "Benford's Law" -- from Wolfram MathWorld.
http://mathworld.wolfram.com/BenfordsLaw.html.
Wolfram Alpha. 2015. first 200 fibonacci numbers - Wolfram|Alpha.
February 20. http://www.wolframalpha.com/input/?
i=first+200+fibonacci+numbers.

10

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015

Appendix
Positio
Number in sequence
n
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

1
1
2
3
5
8
13
21
34
55
89
144
233
377
610
987
1597
2584
4181
6765
10946
17711
28657
46368
75025
121393
196418
317811
514229
832040
1346269
2178309
3524578
5702887
9227465
14930352
24157817
39088169
63245986
11

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83

102334155
165580141
267914296
433494437
701408733
1134903170
1836311903
2971215073
4807526976
7778742049
12586269025
20365011074
32951280099
53316291173
86267571272
139583862445
225851433717
365435296162
591286729879
956722026041
1548008755920
2504730781961
4052739537881
6557470319842
10610209857723
17167680177565
27777890035288
44945570212853
72723460248141
117669030460994
190392490709135
308061521170129
498454011879264
806515533049393
1304969544928660
2111485077978050
3416454622906710
5527939700884760
8944394323791460
14472334024676200
23416728348467700
37889062373143900
61305790721611600
99194853094755500
12

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129

160500643816367000
259695496911123000
420196140727490000
679891637638612000
1100087778366100000
1779979416004710000
2880067194370820000
4660046610375530000
7540113804746350000
12200160415121900000
19740274219868200000
31940434634990100000
51680708854858300000
83621143489848400000
135301852344707000000
218922995834555000000
354224848179262000000
573147844013817000000
927372692193079000000
1500520536206900000000
2427893228399980000000
3928413764606870000000
6356306993006850000000
10284720757613700000000
16641027750620600000000
26925748508234300000000
43566776258854900000000
70492524767089100000000
114059301025944000000000
184551825793033000000000
298611126818977000000000
483162952612010000000000
781774079430987000000000
1264937032043000000000000
2046711111473990000000000
3311648143516980000000000
5358359254990970000000000
8670007398507950000000000
14028366653498900000000000
22698374052006900000000000
36726740705505800000000000
59425114757512700000000000
96151855463018400000000000
155576970220531000000000000
251728825683550000000000000
407305795904081000000000000
13

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
130
659034621587630000000000000
131
1066340417491710000000000000
132
1725375039079340000000000000
133
2791715456571050000000000000
134
4517090495650390000000000000
135
7308805952221450000000000000
136
11825896447871800000000000000
137
19134702400093300000000000000
138
30960598847965100000000000000
139
50095301248058400000000000000
140
81055900096023500000000000000
141
131151201344082000000000000000
142
212207101440105000000000000000
143
343358302784187000000000000000
144
555565404224293000000000000000
145
898923707008480000000000000000
146
1454489111232770000000000000000
147
2353412818241250000000000000000
148
3807901929474030000000000000000
149
6161314747715280000000000000000
150
9969216677189300000000000000000
151
16130531424904600000000000000000
152
26099748102093900000000000000000
153
42230279526998500000000000000000
154
68330027629092400000000000000000
155
110560307156091000000000000000000
156
178890334785183000000000000000000
157
289450641941274000000000000000000
158
468340976726457000000000000000000
159
757791618667731000000000000000000
160
1226132595394190000000000000000000
161
1983924214061920000000000000000000
162
3210056809456110000000000000000000
163
5193981023518030000000000000000000
164
8404037832974140000000000000000000
165
13598018856492200000000000000000000
166
22002056689466300000000000000000000
167
35600075545958500000000000000000000
168
57602132235424800000000000000000000
169
93202207781383200000000000000000000
170
150804340016808000000000000000000000
171
244006547798191000000000000000000000
172
394810887814999000000000000000000000
173
638817435613191000000000000000000000
174
1033628323428190000000000000000000000
175
1672445759041380000000000000000000000
14

Candidate Name: Alex Evat Lineekela Hawala

Candidate number: 0015
176
2706074082469570000000000000000000000
177
4378519841510950000000000000000000000
178
7084593923980520000000000000000000000
179
11463113765491500000000000000000000000
180
18547707689472000000000000000000000000
181
30010821454963500000000000000000000000
182
48558529144435400000000000000000000000
183
78569350599398900000000000000000000000
184
127127879743834000000000000000000000000
185
205697230343233000000000000000000000000
186
332825110087068000000000000000000000000
187
538522340430301000000000000000000000000
188
871347450517368000000000000000000000000
189
1409869790947670000000000000000000000000
190
2281217241465040000000000000000000000000
191
3691087032412710000000000000000000000000
192
5972304273877740000000000000000000000000
193
9663391306290450000000000000000000000000
194
15635695580168200000000000000000000000000
195
25299086886458700000000000000000000000000
196
40934782466626800000000000000000000000000
197
66233869353085500000000000000000000000000
198
107168651819712000000000000000000000000000
199
173402521172798000000000000000000000000000
200
280571172992510000000000000000000000000000

15