Question

According to Benford's Law, a variety of different data sets include numbers with leading (first) digits that follow the distribution shown in the table below. Test for goodness-of-fit with Benford's Law. Leading Digit 1, 2 , 3, 4 ,5 ,6 ,7, 8, 9 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% ​ When working for the Brooklyn District Attorney, investigator Robert Burton analyzed the leading digits of the amounts from 852 checks issued by seven suspect companies. The frequencies were found to be 252, 150, 103, 86, 72, 60, 51, 40, and 38 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?

Answer 1