Accounting and Financial Reporting

When Sequence Counts: Benford's Law Can Help You Detect Fraud

Image from December 2021 GFR

Fraudsters sometimes remain undetected for long periods of time, even years, causing organizations to lose millions of dollars. How do they get away with it? Internal controls are critical for fraud prevention, but they are not perfect. There are many ways they can fail, including poor judgment, human error, collusion, management override of internal controls, lack of segregation of duties, and unforeseeable circumstances.

As a result, organizations should have additional internal controls in place for fraud detection. One of those additional controls is something you might not have heard of—Benford’s Law.