Benfords Law states that most phenomena in nature begin with 1s and

Question

Benford’s Law states that most phenomena in nature begin with ‘1’s and ‘2s’. The law has been shown to apply very accurately to the amount of money listed on people’s income statements. Investigators have used this fact when investigating financial fraud, and can often determine when people have fabricated numbers, since the perpetrators will choose varying amounts so that the first number in each of those amounts is distributed evenly from ‘1’ to ‘9’. Proponents of Benford’s Law, therefore, argue that as the technique of applying Benford’s law becomes even more refined, an expert’s ability to determine whether a plaintiff has engaged in financial fraud will become as accurate in determining guilt as a fingerprint is today.

Which of the following, if true, casts the most doubt on the conclusion drawn by proponents of Benford’s Law?

(A) In one financial fraud case, the numbers in which the amount was stated was not distributed evenly across ‘1’s and ‘9’s.

(B) The use of fingerprinting is highly sophisticated since it has had over a century to evolve as a technology.

(C) Benford’sLaw, after being used in several notable cases, has become highly publicized and intimately known to many likely to commit such crimes.

(D) Benford’sLaw is not as accurate for numbers with fewer than six digits, though many fabricated numbers are for sums less than 100,000.

(E) In the last year, several instances of financial fraud were discovered using other means besides Benford’s Law.

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ARYAKASHANDILYA · Answer

I choose D, not sure how C explains well? Can anyone help me understand. please?

Shiv1105 · Answer

Same, man. The law being known to most people doesn't affect the accuracy of the way to determine guilt. Whereas D directly reduces accuracy.

pk14y · Answer

If you think about the implications of C, it suggests that having more people know about the crime leads to  less accuracy  in determining which cases are guilty, as people are now aware of the analysis and are actively avoiding it, therefore leading to less cases where there are 1 and 2s and more cases where 1s and 2s are varied.

On the other hand, D states that at the point  right now  <100,000 is inaccurate. If you read the premise carefully, it states that by time the process will be refined, so there could be a possibility that the law can encompass this edge case/exception.

Bunuel · Answer

Official Explanation

Premise #1  – According to Benford’s Law most numbers begin with ‘1’s, followed in frequency, by ‘2’, then ‘3’, then ‘4’, etc.

Premise #2  – This fact has been used to determine who has been committing fraud because perpetrators randomly distribute the starting number of sums.

Conclusion:  - The better investigators become at using Benford’s Law the more fraud cases are going to be exposed.

Assumption:  - Nothing will change in regards to how perpetrators manipulate amounts in financial statements.

(A) The findings of one financial case does not disprove (or prove) anything. Perhaps that person was aware of Benford’s Law; perhaps that person has a penchant for the number ‘5’. Too many unknowns are at work here.

(B) is tempting. True, one can reason that is a very evolved technology and that Benford’s Law might have trouble catching up. But the key here is “might”. We simply do not know enough about the sophistication of Benford’s Law and the history of fingerprinting to come to this conclusion.

(C) if true, weakens the argument. If perpetrators know about Benford’s Law, they will likely change the way they fudge numbers. In other words, they will make sure that most sums that they fabricate begin with ‘1’, the second most common number will be ‘2’, so and so forth.

(D) is very tempting. What we currently know is that Benford’s Law “can often determine when people have fabricated numbers”. That implies that it is not 100% accurate, and we know this to be true from the final sentence that also states that Benford’s Law is going to become even more refined (meaning it is not currently 100% accurate). Therefore, (D) could be consistent with this: Benford’s Laws inaccuracy derives from the fact that it is not as accurate with smaller sums.

(E) is out of scope. Sure, there are other means besides Benford’s Law, but that doesn’t relate to whether Benford’s Law is going to become even more refined.

VerbalBot · Answer

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Benfords Law states that most phenomena in nature begin with 1s and

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