Review of Integrative Business and Economics Research 14(2), pp. 674-686.
ISSN/ISBN: Not available at this time. DOI: Not available at this time.
Abstract: This paper examines financial data from FTSE all-share companies in the financial services sector using Benford's Laws to detect potential irregularities in accounting numbers that could indicate data manipulation and anomalies. The analysis is based on data sourced from REFINITIV EIKON, encompassing a sample of 63 companies in the banking and investments sector from 2008 to 2022. To address missing data, we implemented various adjustments to ensure the accuracy of the sample studied. The Benford's Laws test has been used to reject the null hypothesis for income and payable income tax distributions, with the most significant irregularities observed in both the first and second digits. Based on the numbers that adhere to Benford's law (the distribution of first digits), it is evident that companies tend to report lower income for tax purposes (as indicated by the prevalence of digits 1 to 3 as the first digit of income taxes), while they have higher tax obligations (as evidenced by the dominance of higher digits 5-7 as the first digits of payable income taxes). Non-compliance with Benford's Laws is a warning sign that the financial statement may be inconsistent or irregular.
Bibtex:
@article{,
author = {Probowo Erawan Sastroredjo},
title = {Benford's Laws Analysis on Tax Irregularities in Banking and Investment Activities: The Case of the FTSE All-Share Index},
year = {2025},
journal = {Review of Integrative Business and Economics Research},
volume = {14},
number = {2},
pages = {674—686},
url = {https://buscompress.com/uploads/3/4/9/8/34980536/riber_14-2_44_s24-017_674-686.pdf},
}
Reference Type: Journal Article
Subject Area(s): Accounting