Chapter 6: Q.17 (page 355)
Benford鈥檚 law and fraud Refer to Exercise 13. It might also be possible to detect an employee鈥檚 fake expense records by looking at the variability in the first digits of those expense amounts.
(a) Calculate the standard deviation 蟽Y. This gives us an idea of how much variation we鈥檇 expect in the employee鈥檚 expense records if he assumed that first digits from to were equally likely.
(b) Now calculate the standard deviation of first digits that follow Benford鈥檚 law (Exercise 5). Would using standard deviations be a good way to detect fraud? Explain.
Short Answer
a). The standard deviation is the square root of the variance is.
b). The standard deviation is the square root of the variance is .


