Solution Found!
Benfords law and fraud Refer to Exercise 13. It might also be possible to detect an
Chapter 6, Problem 17(choose chapter or problem)
Benfords law and fraud Refer to Exercise 13. It might also be possible to detect an employees fake expense records by looking at the variability in the first digits of those expense amounts. (a) Calculate the standard deviation sY. This gives us an idea of how much variation wed expect in the employees expense records if he assumed that first digits from 1 to 9 were equally likely. (b) Now calculate the standard deviation of first digits that follow Benfords law (Exercise 5). Would using standard deviations be a good way to detect fraud? Explain.
Questions & Answers
QUESTION:
Benfords law and fraud Refer to Exercise 13. It might also be possible to detect an employees fake expense records by looking at the variability in the first digits of those expense amounts. (a) Calculate the standard deviation sY. This gives us an idea of how much variation wed expect in the employees expense records if he assumed that first digits from 1 to 9 were equally likely. (b) Now calculate the standard deviation of first digits that follow Benfords law (Exercise 5). Would using standard deviations be a good way to detect fraud? Explain.
ANSWER:Step 1 of 4
The first digits of expense amounts should be equally likely to be any of the numbers from 1 to 9. Using the histogram which shows the probability distribution of first digit Y of a randomly selected expense amount. We have to calculate the variability to determine whether employees fake expense records by looking at the variability in the first digits of those expense amounts: