What is it about?
Many researchers use the “Financial Statement Divergence” score —a measure of how much the numbers in a company’s financial statements deviate from Benford’s Law— as an indicator of accounting quality. This study tests whether that score really works. We examine if (1) error-free financial statements actually follow Benford’s Law, and (2) if errors or manipulations reliably make the score worse. Using a large dataset of U.S. firms and simulations, we find that error-free statements often don’t match Benford’s pattern, and that errors can increase, decrease, or leave the score unchanged.
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Why is it important?
If a metric doesn’t behave as expected, relying on it can lead to wrong conclusions. Our findings suggest that the Financial Statement Divergence score may not be a reliable way to assess the accuracy of a company’s financial statements. This is important for auditors, regulators, and researchers who use Benford-based measures to detect misreporting or fraud.
Perspectives
The study challenges a popular assumption in forensic accounting and auditing: that deviations from Benford’s Law are a clear sign of data problems. We show that the relationship is far less straightforward. This calls for caution in using Benford-based tools to assess accounting accuracy and opens the door for developing alternative, more reliable indicators.
Dr Manuel Cano-Rodríguez
University of Jaén
Read the Original
This page is a summary of: Divergence from Benford’s law fails to measure financial statement accuracy, International Journal of Accounting Information Systems, December 2025, Elsevier,
DOI: 10.1016/j.accinf.2025.100745.
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