5.75 Benford’s law, continued
Benford’s law suggests that the proportion of legitimate invoices with a first digit of 1, 2, or 3 is much greater than if the digits were distributed as equally likely outcomes. As a fraud investigator, you would be suspicious of some potential wrongdoing if the count of invoices with a first digit of 1, 2, or 3 is too low. You decide if the count is in the lower 5% of counts expected by Benford’s law, then you will call for a detailed investigation for fraud.
5.75
(a) . (b) 0.575 or less. (c) 0.0155. (d) 0.5765. The values are very close; the Normal approximation works well here.