Fact and Fiction in EU-Governmental Economic Data

  title={Fact and Fiction in EU-Governmental Economic Data},
  author={Bernhard Rauch and Max G{\"o}ttsche and Stefan Engel and Gernot Br{\"a}hler},
  journal={German Economic Review},
  pages={243 - 255}
Abstract To detect manipulations or fraud in accounting data, auditors have successfully used Benford’s law as part of their fraud detection processes. Benford’s law proposes a distribution for first digits of numbers in naturally occurring data. Government accounting and statistics are similar in nature to financial accounting. In the European Union (EU), there is pressure to comply with the Stability and Growth Pact criteria. Therefore, like firms, governments might try to make their economic… 

Figures and Tables from this paper


This article builds on research published in the article "Fact and Fiction in EU Governmental Economics Data" (Rauch, Göttsche, Brähler, 2011). By exploring the possibilities of applying Benford’s

Deficit versus social statistics: empirical evidence for the effectiveness of Benford’s law

When analysing the quality of data, nonconformity with Benford’s law can be a useful indicator of poor data quality, which may be a result of fraud or manipulation. In this article, we use Benford’s

Applying Benford’s Law to Detect Accounting Data Manipulation in the Banking Industry

We utilise Benford’s Law, which predicts the frequencies in different digits in data, to test if balance sheet and income statement data used to assess bank soundness were manipulated prior to, and

Detection of Anomalies in Accounting Data Using Benford’s Law: Evidence from India

This study uses the financial accounting data to examine if they depart from Benford’s Law. Using large sample of Indian public listed companies, the study conducts an analysis of the “first digit

Benford’s law and Theil transform of financial data

Applying Benford’s law to detect fraudulent practices in the banking industry

In this paper, we take a glimpse at the dark side of bank accounting statements by using a mathematical law which was established by Benford in 1938 to detect data manipulation. We shed the spotlight

Empirical Methods in Competition Analysis – Applying Benford's Law to the Western Australian Petroleum Market

In this paper, we develop a robust empirical indicator for screening and detecting statistical anomalies that may provide circumstantial evidence of explicit collusion between companies or a



Does Benford’s Law hold in economic research and forecasting?

First and higher order digits in data sets of natural and socio-economic processes often follow a distribution called Benford’s law. This phenomenon has been used in business and scientific

The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics

In this paper we present a technique for assessing data quality based on conformity with Benford's Law, which states that the first digits of numbers generated from natural phenomena do not occur

Benford’s Law as an Indicator of Fraud in Economics

Abstract Contrary to intuition, first digits of randomly selected data are not uniformly distributed but follow a logarithmically declining pattern, known as Benford’s law. This law is increasingly

Earnings cosmetics in a tax-driven accounting environment: evidence from Finnish public firms

Finnish firms are known to manage earnings downwards to avoid income taxes. This study suggests that they simultaneously manage earnings upwards in a smaller scale. The idea behind this behaviour is

Benford’s Law: an instrument for selecting tax audit targets?

We consider whether Benford’s Law can be used to improve target selection prior to the start of on-site tax audits, thus increasing effectiveness and efficiency of fiscal enforcement. Laboratory

An Assessment of the Change in the Incidence of Earnings Management Around the Enron‐Andersen Episode

In 2001 Enron filed amended financial statements setting off a chain of events starting with its bankruptcy filing and including the conviction of Arthur Andersen for obstruction of justice. The end

The impact of audit quality on earnings rounding-up behaviour: some UK evidence

Previous studies (see, for example, Carslaw, 1988; Thomas, 1989; Niskanen and Keloharju, 2000; Kinnunen and Koskela, 2002; Van Caneghem, 2002) clearly suggest that public companies' managers tend to

Anomalies and Unusual Patterns in Reported Earnings: Japanese Managers Round Earnings

Using Benford's law, this study documents pervasive evidence that managers of Japanese firms tend to engage in earnings manipulative activities of rounding earnings numbers to achieve key reference

The effective use of Benford's Law to assist in detecting fraud in accounting data

The purpose of this paper is to assist auditors in the most effective use of digital analysis based on Benford’s law, which is based on a peculiar observation that certain digits appear more frequently than others in data sets.

Earnings Management Induced by Cognitive Reference Points

Abstract Previous studies (Carslaw, 1988; Thomas, 1989; Niskanen & Keloharju, 2000) have shown that companies' managers tend to round-up the first digits of reported earnings (i.e. for companies