APPLYING BENFORD′S LAW IN FINANCIAL STATEMENTS ANALYSIS

Benford's Law is used to detect manipulation in various spheres of life. Benford's Law can recognize the probabilities of numbers frequencies in a data set. The probabilities are based on mathematical logarithms of the occurrence of digits in randomly generated numbers in large data sets. When comparing the expected distribution following Benford ' s Law with the observed distribution in a data set, strong deviations from the expected frequencies may indicate the data to be suspicious and poosiibly manipulated. A digit analysis using Benford's Law is widely used by auditors, forensic accountants and it is also used for tax evasion. The aim of this article is to verify whether comparable results will be obtained when applying the Benford ' s Law to all accounting data from accounting books, data in the financial statements, data from the VAT cotrol statement and to decide whethetr Benford ' s Law can be used for special examinations by state authorities as an effective tool to spot anomalies in financial statements and VAT statement in Slovak conditions.