Math Theory Offers Way to Detect Cooked Books

That is, these numbers should begin disproportionately with the digit "1," and progressively less often with bigger digits, and if they don't, that is a sign that the books have been cooked. When people fake plausible-seeming numbers, they generally use more "5s" and "6s" as initial digits, for example, than would be predicted by Benford's Law.

Nigrini's work has been well-publicized and has no doubt been noted by accountants and by prosecutors. Whether the Enron and Arthur Andersen people have heard of it is unclear, but investigators might want to check if the percentage of leading digits in the Enron documents is what Benford's Law predicts. Such checks are not fool-proof and sometimes lead to false positive results, but they provide an extra tool that might be useful in certain situations.

It would be amusing if, in looking out for No. 1, the culprits forgot to look out for their "1s." Imagine the Andersen shredders muttering that there weren't enough leading "1s" on the Enron documents they were feeding into the machines. A 1-derful fantasy!

Professor of mathematics at Temple University and adjunct professor of journalism at Columbia University, John Allen Paulos is the author of several best-selling books, including Innumeracy and A Mathematician Reads the Newspaper. His Who’s Counting? column on appears every month.

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