Note: This is a silly application. Don’t take anything seriously. Benford’s law describes a phenomenon where numbers in any data series will exhibit patterns in their first digit. For instance, if you took a list of the 1,000 longest rivers of Mongolia, or the average daily calorie consumption of mammals, or the wealth distribution of German soccer players, you will on average see that these numbers start with “1” about 30% of the time.

Erik Bernhardsson

An exploratory analysis applying Benford's law to detect potential accounting fraud in ~5,000 US public company annual reports (10-K filings). The author extracts dollar amounts from SEC filings, computes empirical first-digit distributions, and ranks companies by KL-divergence from the expected Benford distribution. The post is explicitly framed as a fun experiment, not a serious fraud investigation, and cautions against the prosecutor's fallacy when interpreting outliers.

Detecting corporate fraud using Benford's law