We've long been intrigued with Benford's Law and its potential for Analytic Journalism. Today we ran across a new post by Charley Kyd that explains both the Law and presents some clear formulas for its application.
An Excel 97-2003 Tutorial:
Benford's Law addresses an amazing characteristic of data. Not only does his formula help to identify fraud, it could help you to improve your budgets and forecasts.
by Charley Kyd
(Follow this link for the Excel 2007 version.)
Unless you're a public accountant, you probably haven't experimented with Benford's Law.
Auditors sometimes use this fascinating statistical insight to uncover fraudulent accounting data. But it might reveal a useful strategy for investing in the stock market. And it might help you to improve the accuracy of your budgets and forecasts.
This article will explain Benford's Law, show you how to calculate it with Excel, and suggest ways that you could put it to good use.
From a hands-on-Excel point of view, the article describes new uses for the SUMPRODUCT function and discusses the use of local and global range names. [Read more…]