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Applying Benford's Law to individual financial reports: An empirical investigation on the basis of SEC XBRL filings


  • Henselmann, Klaus
  • Scherr, Elisabeth
  • Ditter, Dominik


The business reporting standard XBRL offers the opportunity to easily extract and analyze a sufficient number of monetary items out of single annual reports for statistical analysis purposes. Using XBRL 10-K reports filed with the SEC EDGAR system, we derive first digit distributions for single companies and measure the deviation from the Benford distribution. On average, we find that for all monetary numbers that are contained in the examined XBRL reports, the first digit distribution follows Benford's Law. Furthermore, our results indicate several line items with an abnormal digit frequency potentially indicating human interaction. Taken together, the empirical results suggest that the application of Benford's Law to financial reports might be a useful analytical tool for investors. The findings also may be of interest to the SEC for planning enforcement actions, as digit analysis could be an appropriate means of identifying suspect line items carrying a higher level of risk.

Suggested Citation

  • Henselmann, Klaus & Scherr, Elisabeth & Ditter, Dominik, 2013. "Applying Benford's Law to individual financial reports: An empirical investigation on the basis of SEC XBRL filings," Working Papers in Accounting Valuation Auditing 2012-1 [rev.], Friedrich-Alexander University Erlangen-Nuremberg, Chair of Accounting and Auditing.
  • Handle: RePEc:zbw:fauacc:20121r

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    References listed on IDEAS

    1. Fei Leng & Ehsan H. Feroz & Zhiyan Cao & Sergio V. Davalos, 2011. "The Long-Term Performance and Failure Risk of Firms Cited in the US SEC's Accounting and Auditing Enforcement Releases," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 38(7-8), pages 813-841, September.
    2. Christoph Watrin & Ralf Struffert & Robert Ullmann, 2008. "Benford’s Law: an instrument for selecting tax audit targets?," Review of Managerial Science, Springer, vol. 2(3), pages 219-237, November.
    3. Das, Somnath & Zhang, Huai, 2003. "Rounding-up in reported EPS, behavioral thresholds, and earnings management," Journal of Accounting and Economics, Elsevier, vol. 35(1), pages 31-50, April.
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    More about this item


    Benford'sches Gesetz; Ziffernanalyse; XBRL; Interactive Data; SEC Veröffentlichungen; Bilanzanalyse; Bilanzfälschung; Benford's Law; Digit Analysis; XBRL; Interactive Data; SEC filings; Financial Statement Analysis; Forensic Accounting;

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access


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