<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The financial numbers game is unfortunately alive and doing well. One of the forensic accounting techniques is based on Benford’s Law and is used for the detection of unusual transactions, anomalies or trends. The aim of this paper is to test whether the financial statements of Croatian companies deviate from Benford’s Law distribution. The financial statements of 24 companies that are in the pre-bankruptcy settlement process and 24 companies that are not in the pre-bankruptcy settlement process were analysed using the Benford’s Law test of the first digit distribution for the period from 2015 to 2018. The data used to calculate the first digits of distribution were taken from the Zagreb Stock Exchange. The chi-square test has shown that the observed companies that are not in the process of pre-bankruptcy settlement do not have the first digit distribution which follows the Benford’s Law distribution. The Kolmogorov-Smirnov Z test has shown that the distribution of the first digits from the financial statements of companies listed on the Zagreb Stock Exchange fits to Benford’s Law distribution.</p></abstract>

The financial numbers game is unfortunately alive and doing well. One of the forensic accounting techniques is based on Benford’s Law and is used for the detection of unusual transactions, anomalies or trends. The aim of this paper is to test whether the financial statements of Croatian companies deviate from Benford’s Law distribution. The financial statements of 24 companies that are in the pre-bankruptcy settlement process and 24 companies that are not in the pre-bankruptcy settlement process were analysed using the Benford’s Law test of the first digit distribution for the period from 2015 to 2018. The data used to calculate the first digits of distribution were taken from the Zagreb Stock Exchange. The chi-square test has shown that the observed companies that are not in the process of pre-bankruptcy settlement do not have the first digit distribution which follows the Benford’s Law distribution. The Kolmogorov-Smirnov Z test has shown that the distribution of the first digits from the financial statements of companies listed on the Zagreb Stock Exchange fits to Benford’s Law distribution.

The empirical analysis of financial reports of companies in Croatia: Benford distribution curve as a benchmark for first digits

Croatian Review of Economic, Business and Social Statistics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The financial numbers game is unfortunately alive and doing well. One of the forensic accounting techniques is based on Benford’s Law and is used for the...

The empirical analysis of financial reports of companies in Croatia: Benford distribution curve as a benchmark for first digits

Published Online: Dec 21, 2019

Page range: 90 - 100

Received: Oct 30, 2019

Accepted: Nov 29, 2019

DOI: https://doi.org/10.2478/crebss-2019-0014

Keywords
Benford’s Law, Chi-square goodness-of-fit test, first digits, forensic accounting, Kolmogorov-Smirnov Z test

© 2019 Ivana Cunjak Mataković, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The empirical analysis of financial reports of companies in Croatia: Benford distribution curve as a benchmark for first digits

Published Online: Dec 21, 2019

Page range: 90 - 100

Received: Oct 30, 2019

Accepted: Nov 29, 2019

DOI: https://doi.org/10.2478/crebss-2019-0014

KeywordsBenford’s Law, Chi-square goodness-of-fit test, first digits, forensic accounting, Kolmogorov-Smirnov Z test

© 2019 Ivana Cunjak Mataković, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Benford’s Law, Chi-square goodness-of-fit test, first digits, forensic accounting, Kolmogorov-Smirnov Z test