<p>Two tools for fraud detection are discussed in this course; Benford’s Law and the Beneish M Score. Benford’s Law predicts the probability of the distribution of first digits in a set of accounting numbers. For the first digit, one is the most likely occurrence, followed by two, etc. In a large population of accounting transactions, by comparing the actual occurrence of first digits in accounting numbers to the Benford distribution, areas of concern are highlighted for further analysis and evaluation.</p><p>The Beneish M Score quantifies the possibility of financial manipulation occurring in financial statements. If the M Score is greater than (or less negative than) -2.22, it is likely that there is some manipulation of the financial results.</p><p>Both of these are powerful tools in the detection of fraud. Benford’s Law assists in the detection of transactional fraud while the Beneish M Score assists in the detection of fraud in financial reporting.</p>
Course Publication Date:
April 18, 2025
This course is available with
NO ADDITIONAL FEE if you have an active
self study membership or
all access membership or can be purchased for
$15.00!
| Author: | Mill Creek Publishing |
| Course No: | AUD-FRAUDDET-9125 |
| Recommended CPE: | 1.50 |
| Delivery Method: | QAS Self Study |
| Level of Knowledge: | Overview |
| Prerequisites: | None |
| Advanced Preparation: | None |
| Recommended Field of Study: | Auditing
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Learning Objectives
- Describe how to use Benford’s Law to detect potential fraud.
- Define which Excel features can be incorporated when using Benford’s Law.
- Define and Interpret the results of statistical test results and Benford’s Law.
- Define situations where Benford’s Law is and is not applicable.
- Describe the Beneish M Score and its components.