This course provides in-depth coverage of two specific tools for fraud detection. Benford's Law predicts the probability of the distribution of first digits in a set of accounting numbers. In a large population of accounting transactions, by comparing the actual occurrence of first digits in accounting numbers to the Benford distribution, areas of concern are highlighted for further analysis and evaluation. The Beneish M Score quantifies the possibility of financial manipulation occurring in financial statements. If the M Score is greater than (or less negative than) -2.22, it is likely that there is some manipulation of the financial results.
Benford's Law assists in the detection of transactional fraud while the Beneish M Score assists in the detection of fraud in financial reporting. Both of these are powerful tools in the detection of fraud.
Upon successful completion of this course, participants will be able to:
- Recognize how to use Benford’s Law to detect potential fraud
- Identify situations where Benford’s Law is and is not applicable
- Recognize the Beneish M Score and its components
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