Anvendelsen af Benford’s Lov i praktisk besvigelsestestning: Revisors ansvar i forbindelse med afdækning af besvigelser, herunder en analyse af anvendeligheden af Benford’s Lov i praktisk besvigelsestestning

Jakob Thisted Binder

Student thesis: Master thesis


Executive Summary: This thesis has been written in conclusion of the MSc (Business Administration & Auditing) studies at CBS. It analyses the auditor’s responsibility in connection with detection and identification of fraud. Furthermore, it brings suggestions for alternative, practical fraud testing tools as the existing Standards on Auditing are assessed to focus highly on a number of theoretical procedures by which there is no active focus on how fraud can be identified in practice. The thesis has been divided into a number of chapters, each with their own focus. Initially, a description of the concept of fraud is provided as well as a theoretical analysis of the various types of fraud and related fraud factors. Here, it is found that the Standards on Auditing only focus on the fraud types ”misappropriation of assets” and ”fraudulent financial reporting”. The thesis continues with a review of the auditor’s responsibility in connection with the identification of fraud, including what is to be performed in the introductory review of the entity as well as when planning the audit. The analysis shows that, according to the Standards of Auditing, the auditor has been imposed a number of minimum procedures to be performed in the planning process. These minimum procedures comprise, among other things, preparation of audit strategy and audit plan as well as it is emphasised that the auditor is to maintain his professional scepticism throughout the audit. The second part of the thesis comprises a theoretical introduction to Benford’s law and its application in practical fraud testing. In this part, a number of practical examples are also analysed where Benford’s law has been applied in practice, and it is documented that Benford’s law can be used to identify fraud. On the basis of the theoretical analysis of Benford’s law, a number of practical tests are made based on a model prepared in Excel. From these tests, the conclusion is that Benford’s law can be used in practice on fraud testing in normal audit cases without requiring high IT competences or compromising effective performance of the audit. In my overall opinion, Benford’s law and other practical fraud tools will gain further grounds in the years to come as their efficiency clearly exceeds the resource-consuming costs related to using them. This is due to, among other things, the technological development having made it possible to analyse large amounts of data in a very short period of time.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2015
Number of pages89