“Some numbers really are more popular than others.” Mark J. Nigrini (1998a:15) The above idea appears to defy common sense. In a random sequence of numbers drawn from a company’s financial books, every digit from 1 to 9 seems to have a one-in-nine chance of being the leading digit when used in a series of numbers. But, according to a mathematical formula of over 60 years old making its way into the field of accounting, certain numbers are actually more popular than others (Nigrini, 1998a:15). Accounting numbers usually follow a mathematical law, named Benford’s Law, of which the result is so unpredictable that fraudsters and manipulators, as a rule, do not succeed in observing the Law. With this knowledge, the forensic accountant is empowered to detect irregularities, anomalies, errors or fraud that may be present in a financial data set. The main objective of this study was to evaluate the effectiveness of Benford’s Law as a tool for forensic accountants. The empirical research used data from Company X to test the hypothesis that, in the context of financial fraud investigations, a significant difference between the actual and expected frequencies of Benford’s Law could be an indication of an error, fraud or irregularity. The effectiveness of Benford’s Law was evaluated according to findings from the literature review and empirical study. The results indicated that a Benford’s Law analysis was efficient in identifying the target groups in the data set that needed further investigation as their numbers did not match Benford’s Law. / MCom (Forensic Accountancy), North-West University, Potchefstroom Campus, 2014

“Some numbers really are more popular than others.” Mark J. Nigrini (1998a:15) The above idea appears to defy common sense. In a random sequence of numbers drawn from a company’s financial books, every digit from 1 to 9 seems to have a one-in-nine chance of being the leading digit when used in a series of numbers. But, according to a mathematical formula of over 60 years old making its way into the field of accounting, certain numbers are actually more popular than others (Nigrini, 1998a:15). Accounting numbers usually follow a mathematical law, named Benford’s Law, of which the result is so unpredictable that fraudsters and manipulators, as a rule, do not succeed in observing the Law. With this knowledge, the forensic accountant is empowered to detect irregularities, anomalies, errors or fraud that may be present in a financial data set. The main objective of this study was to evaluate the effectiveness of Benford’s Law as a tool for forensic accountants. The empirical research used data from Company X to test the hypothesis that, in the context of financial fraud investigations, a significant difference between the actual and expected frequencies of Benford’s Law could be an indication of an error, fraud or irregularity. The effectiveness of Benford’s Law was evaluated according to findings from the literature review and empirical study. The results indicated that a Benford’s Law analysis was efficient in identifying the target groups in the data set that needed further investigation as their numbers did not match Benford’s Law. / MCom (Forensic Accountancy), North-West University, Potchefstroom Campus, 2014