Quiz - Benford's Law

1. Benford's law was discovered as part of the NASA space program.

True
False

2. Benford's law has NOT been found to be directly useful in which of the following areas?

A. Discovery of income tax fraud?
B. Detection of falsification of survey forms by the surveyor.
C. Determination if a number series is truly random.
D. Flagging expense reports for review.

3. Within a group of numbers which conform with Benford's law, one would expect to see the leading digit of "6" more frequently than that of the digit "4"

True
False

4. Benford's law has only been found to be applicable to the numbers in base 10, i.e. the ordinary counting numbers most people work with on a daily basis.

True
False

5. In the computation of the expected frequency of occurrence for a digit, the formula uses the Naperian (natural) log function.

True
False

6. Which of the following numbers would be expected to follow Benford's law?

A. Length of rivers, measured in miles.
B. Amount of an invoice
C. Hospital stay, measured in days
D. All of the above.

7. The formula for computing the expected frequency of the first two digits would be log(1+(1/N)) where N is the first two digits between 10 and 99 inclusive

True
False

8. Leading zeros in numbers do affect the computations made using Benford's law

True
False

9. When doing a review of employee expense reports, the auditor does a Benford test of the first two digits. This tests reveals that the number combination of 24 far exceeds that which would be expected using Benford's law. The auditor should probably conclude which of the following as the most likely explanation?

A. Employees tend to use even digits, e.g. 2 and 4
B. Benford's law is not applicable in this instance
C. Most legitimate expense reports will be for $20 or more.
D. Expense reports are clustered just under an IRS daily limit of $25.

10. Benford's law is NOT applicable to the SECOND digit alone.

True
False

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