The leading digit distribution of the worldwide Illicit Financial Flows

Benford's law states that in data sets from different phenomena leading digits tend to be distributed logarithmically such that the numbers beginning with smaller digits occur more often than those with larger ones. Particularly, the law is known to hold for different types of financial data. The Illicit Financial Flows (IFFs) exiting the developing countries are frequently discussed as hidden resources which could have been otherwise properly utilized for their development. We investigate here the distribution of the leading digits in the recent data on estimates of IFFs to look for the existence of a pattern as predicted by Benford's law and establish that the frequency of occurrence of the leading digits in these estimates does closely follow the law.Comment: 13 pages, 10 figures, 6 tables, additional data analyi

CEO Profile and Earnings Quality

This paper introduces the PSCORE, which aggregates nine personal characteristics of chief executive officers (CEOs), to signal the quality of earnings. The PSCORE is a composite score based on publicly available data on CEOs. The study reports strong positive relationships between the PSCORE and two different proxies for earnings quality, (i) discretionary accruals and (ii) financial statement errors, measured by deviations of the first digits of figures reported in financial statements from those expected by Benford’s Law. Further analyses indicate that the relationships between the PSCORE and the proxies for earnings quality become more pronounced when CEOs have high equity-based compensation incentives. The findings have some implications for practitioners

Applying Benford’s law to detect accounting data manipulation in the banking industry

We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital

The use of dynamic elastomeric fabric orthosis suits as an orthotic intervention in the management of children with neuropathic onset scoliosis: A retrospective audit of routine clinical case notes

BACKGROUND: To date the main treatment approach for neuropathic onset scoliosis has utilised thoracic lumbar sacral orthoses (TLSO) to stabilize the spine and enable stable sitting. Dynamic elastomeric fabric orthoses (DEFOs) may achieve both of these aims if used as an early intervention. Due to a lack of evidence in this area, a retrospective audit of case notes was undertaken to understand current orthotic practice investigating the usage, outcomes and clinical characteristics of treated children with neuropathic onset scoliosis. Clinical notes of 180 children at risk for, or identified with, scoliosis were audited using a search matrix to identify diagnostic group, spinal muscle tone, Gross Motor Functional Classification Scale (GMFCS) level, orthotic treatment modalities, scoliosis specific data, surgical interventions, adaptive technologies used, and outcome measurements reported. RESULTS: Of the 180 notes examined, 85 were male; mean age nine years one month [SD four years seven months]. Spinal muscle tone was reported in 137 cases: 122/137 presented as low tone, 4/137 high tone, 6/137 fluctuating tone and 5/137 typical tone. Scoliosis was confirmed in (77/180) of whom (39/77) used a DEFO. Another (43/180) had a spinal curve developing, of whom (22/43) used a DEFO. The remaining (60/180) had no report of spinal curvature, but used a DEFO as a preventative measure. GMFCS scores were reported for 49 children of whom 14/49 were graded as level 4 and 17/49 level 5. Of the children with scoliosis who had spinal curve shapes reported, 48/60 had a C-shape presentation and 12/60 had an S-shape. CONCLUSIONS: The findings confirm previously reported papers in children with neuropathic onset scoliosis in relation to curve shape and GMFCS levels. It provides some evidence of the role DEFOs may have in the management of these children, and highlights the need for further research in this area due to the lack of peer-reviewed publications

The Newcomb-Benford Law in Its Relation to Some Common Distributions

An often reported, but nevertheless persistently striking observation, formalized as the Newcomb-Benford law (NBL), is that the frequencies with which the leading digits of numbers occur in a large variety of data are far away from being uniform. Most spectacular seems to be the fact that in many data the leading digit 1 occurs in nearly one third of all cases. Explanations for this uneven distribution of the leading digits were, among others, scale- and base-invariance. Little attention, however, found the interrelation between the distribution of the significant digits and the distribution of the observed variable. It is shown here by simulation that long right-tailed distributions of a random variable are compatible with the NBL, and that for distributions of the ratio of two random variables the fit generally improves. Distributions not putting most mass on small values of the random variable (e.g. symmetric distributions) fail to fit. Hence, the validity of the NBL needs the predominance of small values and, when thinking of real-world data, a majority of small entities. Analyses of data on stock prices, the areas and numbers of inhabitants of countries, and the starting page numbers of papers from a bibliography sustain this conclusion. In all, these findings may help to understand the mechanisms behind the NBL and the conditions needed for its validity. That this law is not only of scientific interest per se, but that, in addition, it has also substantial implications can be seen from those fields where it was suggested to be put into practice. These fields reach from the detection of irregularities in data (e.g. economic fraud) to optimizing the architecture of computers regarding number representation, storage, and round-off errors

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

Audit target selection, Experiments, Benford’s Law, Tax audit, Noncompliance, H26, C91,