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When Working for the Brooklyn District Attorney, Investigator Robert Burton

question 25

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 Leading Digit 123456789 Benford’s law:  distribution of  leading digits 30.1%17.6%12.5%9.7%7.9%6.7%5.8%5.1%4.6%\begin{array} { | l | c | c | c | c | c | c | c | c | c | } \hline \text { Leading Digit } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \\\hline \begin{array} { l } \text { Benford's law: } \\\text { distribution of } \\\text { leading digits }\end{array} & 30.1 \% & 17.6 \% & 12.5 \% & 9.7 \% & 7.9 \% & 6.7 \% & 5.8 \% & 5.1 \% & 4.6 \% \\\hline\end{array}
When working for the Brooklyn District Attorney, investigator Robert Burton analyzed the leading digits of the amounts from 784 checks issued by seven suspect companies. The frequencies were found to be 0,18,0,79,476,180,8,23 , and 0 , and those digits correspond to the leading digits of 1,2,3,4,5,6,7,8 , and 9 , respectively. If the observed frequencies are substantially different from the frequencies expected with Benford's Law, the check amounts appear to result from fraud. Use a 0.05 significance level to test for goodness-of-fit with Benford's Law. Does it appear that the checks are the result of fraud?


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