Benford's Law

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0 1 2 3 4 5 initial digit 6 7 8 9

Simon Newcomb, 18351909

Newcomb, S. "Note on the Frequency of the Use of Digits in Natural Numbers." Amer. J. Math. 4, 39-40, 1881. Benford, F. "The Law of Anomalous Numbers." Proc. Amer. Phil. Soc. 78, 551-572, 1938.

Examples
Population Estimates for US Cities with Populations of 10,000 and Greater
0.6

0.5

0.4

~ 3000 samples
0.3

1998 1990 Benford

0.2

0.1

0 1 2 3 4 5 6 7 8 9

Popul tion for Pl c

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 1 2 3 4 5

in A

~ 1000 samples

More examples
Area for Places in CA (km^2)
0.35

cattle production, carcass weights, annual consumption, corn prices

0.4

0.3

0.35
0.25

0.3
0.2 0.15 0.1

~ 1000 samples

0.25 0.2 0.15 0.1

< 100 samples

0.05 0 1 2 3 4 5 6 7 8 9

0.05 0 1 2 3 4 5 6 7 8 9

reciprocals from 1 to 100

0.6

0.5

0.4

0.3

0.2

0.1

0 1 2 3 4 5 6 7 8 9

Scaling

0.

0. 5
0. x x x x x

0.

0. 5

0.

0.

0.05

uniform distribution, scaled

0.

0.

0.

 

0.

0. 5

0 1 2 3 4 5 6 7 8 9

composite distribution

Scaling, continued
10 9 8 7 100 6 5 4 10 3 2 1 0 0.8 0.9 1 1.1 1.2 1 0.8 0.9 1 1.1 1.2 1000

uniform distribution

logarithmic distribution scale invariant!

dP(x) E ! E P(x) ! d(log x) x

Proof

P(kx) ! f (k)P(x) 1 P(x) x ! 1 P(kx) k dx ! 1 P(kx) ! k P(x) differentiate E x P d ! P(x) P(x) ! (x) x

Eric W. Weisstein, www.treasure-troves.com Hill, T. P. "A Statistical Derivation of the Significant-Digit Law." Stat. Sci. 10, 354-363, 1996.

Distribution of Digits

D 1

P(x)dx

probability of beginning digit D:

PD !

D 10

P(x)dx
1

D  1 ! log   1  ! log10 10 1  D   D

probability of digit sequence D1D2D3:

PD1 D2 D3 L

1    ! log10   1  D1 D2 D3 L 

Application to Accounting

first digits

second digits

Nigrini, M. J. and Mittermaier, L. J. 1997. The Use of Benford's Law as an Aid in Analytical Procedures. Auditing: A Journal of Practice & Theory (Fall): 52-67

Accounting, continued