5.89 Benford’s law. It is a striking fact that the first digits of numbers in legitimate records often follow a distribution known as Benford’s law (see Example 4.12, page 226). Here it is:
First digit | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
Proportion | 0.301 | 0.176 | 0.125 | 0.097 | 0.079 | 0.067 | 0.058 | 0.051 | 0.046 |
Fake records usually have fewer first digits 1, 2, and 3. What is the approximate probability, if Benford’s law holds, that among 1000 randomly chosen invoices there are 575 or fewer in amounts with first digit 1, 2, or 3?