Wednesday, June 24, 2009

Fraud and funny numbers

I am not a mathematician but a mathematical law is supposed to help spot fraud. Known as Benford's Law, it was referred to in the crime investigation TV series "Numb3rs" in the episode "The Running Man".

Apparently, in many sets of numerical data, the first number is not divided equally among the digits 1-9. The number 1 is expected to be present 11% of the time as the first digit but under Benford's Law, "the first digit is 1 almost one third of the time, and larger digits occur as the leading digit with lower and lower frequency, to the point where 9 as a first digit occurs less than one time in twenty."

This mathematical principle is important in fraud investigations as it may reveal fictitious data eg made-up daily sales figures when in fact no sales have been made. A criminal when creating fictitious sales figures may well try to distribute the first digits evenly about the various numbers but Benford's Law may show suggest that the figures are made up.

For more details about this mathematical law, see http://en.wikipedia.org/wiki/Benford%27s_law

No comments:

Post a Comment