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Benford's law for audit of public works: an analysis of overpricing in Maracanã soccer arena's renovation

Author

Listed:
  • Flavia C. Rodrigues da Cunha

    () (Brazilian Federal Court of Accounts)

  • Mauricio S. Bugarin

    () (University of Brasilia)

Abstract

Auditing of public works is a time consuming task because budget worksheets are often long and difficult to analyze. The present work illustrates the application of Newcomb-Benford Law (NB Law) to detecting overpricing in worksheets of public works. That law suggests that the frequency of the first digit in a multitude of non-manipulated numerical databases is decreasing from digit 1 to digit 9. The paper describes the relevant statistical tests of NB Law and applies these tests to the work of Brazil's Maracanã Soccer arena renovation for the 2014 FIFA World Cup. Next, it compares NB Law's results with those obtained with the analysis of prices conducted by the Brazilian Court of Accounts (TCU). The tests identified 17 items in the worksheet that did not comply with the Law and corresponded to 71.54% of the total overpricing uncovered by TCU.

Suggested Citation

  • Flavia C. Rodrigues da Cunha & Mauricio S. Bugarin, 2015. "Benford's law for audit of public works: an analysis of overpricing in Maracanã soccer arena's renovation," Economics Bulletin, AccessEcon, vol. 35(2), pages 1168-1176.
  • Handle: RePEc:ebl:ecbull:eb-14-00694
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I2-P120.pdf
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    References listed on IDEAS

    as
    1. Bernhard Rauch & Max Göttsche & Gernot Brähler & Stefan Engel, 2011. "Fact and Fiction in EU‐Governmental Economic Data," German Economic Review, Verein für Socialpolitik, vol. 12(3), pages 243-255, August.
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    More about this item

    Keywords

    Audit. Public works. Newcomb-Benford's law. Overpricing.;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • H8 - Public Economics - - Miscellaneous Issues

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