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Nguyen, TT, Duong, C and Nguyen, N (2018)

Benford’s Law, earnings management, and accounting conservatism: The UK evidence

Proceedings of European Financial Management Association (EFMA) Annual Meeting, Milan.

ISSN/ISBN: Not available at this time. DOI: Not available at this time.

Abstract: We apply Benford’s Law to study first digits of financial statement items of UK listed companies. The evidence shows that the first digits conform to Benford’ Law at the firm- specific level and market level. Further analysis shows that deviations of the first digits of income statement items from Benford’s Law are larger that of balance sheet items and cash flow items, suggesting that income statements may contain more errors. The evidence also supports our hypothesis that, in addition to earnings management, accounting conservatism is a source of deviations of the first digits. We argue that accounting conservatism introduces biases to financial statements, which make accounting figures deviate from the law of digit distributions. The results have some implications for auditors.

@inproceedings{, AUTHOR={Tri Tri Nguyen and Chau Duong and Nguyet Nguyen}, TITLE={Benford’s Law, earnings management, and accounting conservatism: The UK evidence}, BOOKTITLE={Proceedings of the 2018 EFMA Annual Meeting}, ADDRESS={Milan}, YEAR={2018}, URL={}, }

Reference Type: Conference Paper

Subject Area(s): Accounting