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Do the Financial Statements of Listed Companies on the Ljubljana Stock Exchange Pass the Benford’s Law Test?


  • Natasa Omerzu
  • Iztok Kolar


Currently, we need to think about the risks in using the financial statements. Abroad, for a long time, in the detection of irregularities in the financial statements, Benford's law test has been used, which is a very simple, objective and efficient digital analysis that can help identify controversial areas. Since, in Slovenia, its use is still unknown and in practice, and it is rarely used, we checked whether the financial statements of Slovenian companies listed on the Ljubljana Stock Exchange pass the Benford’s law test. Our study is original, as no one has ever tested the company's financial statements on the Ljubljana Stock Exchange with this test. We found that the tested data very well matched the theoretical distribution according to Benford's law. If the deviation of the analysed data from the theoretical distribution is very large, this does not mean that this is a possible fraud in the used financial data. Benford's law helps us identify the controversial areas that require our attention and the decision on how to proceed with the audit or possible investigation of accounting data.

Suggested Citation

  • Natasa Omerzu & Iztok Kolar, 2019. "Do the Financial Statements of Listed Companies on the Ljubljana Stock Exchange Pass the Benford’s Law Test?," International Business Research, Canadian Center of Science and Education, vol. 12(1), pages 54-64, January.
  • Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:1:p:54-64

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    References listed on IDEAS

    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.
    2. Quick, Reiner & Wolz, M., 2005. "Benford's law in German financial statements," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 26962, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Borja Amor-Tapia & Maria T. Tascon, 2016. "Separating Winners from Losers: Composite Indicators Based on Fundamentals in the European Context," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(1), pages 70-94, February.
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    More about this item


    auditors; Benford's law; financial statements; forensic accountants; fraud detection;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


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