Which of the following sets of numbers could a fraud examiner MOST LIKELY benefit from running a Benford’s Law analysis on?

Benford's Law is a data analysis technique used to test the integrity of numerical data. It applies to naturally occurring sets of numbers that are not artificially constrained. Vendor invoice amounts are transactional data that typically follow this pattern, making them an ideal candidate for analysis. Deviations from the expected Benford distribution can indicate anomalies such as fabricated invoices or other fraudulent entries. This analysis helps fraud examiners identify potential red flags in large datasets for further investigation.

A. Telephone numbers are assigned numbers with specific prefixes and structures; they do not occur naturally and will not conform to Benford's Law.
C. Employee identification numbers are typically assigned sequentially or based on a formula, meaning they are not random or naturally occurring.
D. Bank account numbers are assigned by financial institutions according to specific internal rules and structures; they do not follow a natural distribution.

1. Association of Certified Fraud Examiners. (2023). Fraud Examiners Manual, International Edition. Section 4.418, "Data Analysis Techniques." The manual explicitly states that Benford's Law is applicable to data like check amounts, invoice payments, and inventory prices, while it is not suitable for assigned numbers like check numbers or postal codes.

2. Singleton, T. (2011). Understanding and Applying Benford’s Law. ISACA Journal, 3. This article, aligned with fraud examination principles, clarifies that the law is best applied to "data that are the result of a combination of numbers," such as invoice amounts, and not to "assigned numbers," such as bank account or telephone numbers.

3. Nigrini, M. J. (2012). Benford's Law: Applications for Forensic Accounting, Auditing, and Fraud Detection. John Wiley & Sons. Chapter 3, "Data that Conform to Benford's Law," lists transaction-level data (e.g., disbursements, sales, expenses) as ideal candidates.