Applicability of probability theory in auditing: Newcomb-Benford law as a procedure for data compliance analysis

Abstract

Financial statements must be audited to provide credibility to the information disclosed, with the main objective of increasing the level of confidence of its users. Commonly used auditing procedures and those provided for in standards have limitations, making it essential to integrate other procedures, such as the Newcomb-Benford Law (LNB). The LNB becomes useful as an audit procedure, because when the observed frequencies of a set of accounting data do not follow the frequencies expected from the law, it is believed that these data present irregularities, a fact that has already been proven through several studies. With the aim of analyzing the applicability of the LNB in ​​the field of auditing, a retroactive, quantitative, applied, exploratory-descriptive, bibliographical and documentary research was carried out on secondary data referring to the evidenced balances of the accounts receivable and payable, of the company LAM in the period from 2017 to 2020. The results obtained were based on the formulated hypotheses, having been tested by the Z, Chi-Square and MAD statistical tests, which indicated that statistically there is evidence of signs of nonconformities or distortions in the Financial Statements of the company LAM, in accounts receivable and payable.