In this video tutorial we explain what Benford's Law is and how it is used in financial analysis to help forensic investigators detect anomalies.
First we briefly discuss one of the largest investment frauds in history, with specific references to Bernie Madoff and his Ponzi scheme. Then we dive into the history of Benford's Law and show you how and why it works!
We explore two different datasets, including Bernie Madoff's monthly return statements from (1990-2008) and show you how to carry out this analysis in Tableau.
The last section will discuss various limitations of the first-digit test and provide recommendations for its use.
0:00 - Intro
0:10 - Madoff's Investment Scandal
1:02 - What You Will Learn
1:11 - The Discovery of Benford's Law
1:28 - How it Works
2:05 - Covid Cases
2:10 - Benford's Law in Forensic Accounting
2:29 - Examining Sample Superstore Dataset
3:19 - Creating the Calculated Fields
3:36 - Applying Benford's Law to Madoff's Monthly Return Statements
5:36 - Analyzing the Results
7:05 - Limitations and Future Recommendations
