Digital Forensics in Public Finance: Applying Benford’s Law to Indonesian Government

Rifky Pratama Wicaksono, Muhammad Rafi Bakri

Abstract


This study investigates the application of Benford's Law as a forensic tool to detect anomalies in the expenditure data of Indonesian government ministries and agencies. Utilizing transaction records from the SAKTI application for the year 2023, the research focuses on Goods & Services and Capital Expenditures. The analysis employs first-digit, first-two-digit, and first-three-digit tests to identify deviations from the expected digit distributions outlined by Benford's Law. While the first-digit test indicates general conformity, suggesting minimal anomalies, the first-two and first-three-digit tests reveal significant deviations, particularly around regulatory expenditure thresholds (e.g., Rp10 million, 50 million, and 200 million). These findings suggest potential structuring of transactions to circumvent stricter oversight, highlighting the need for enhanced auditing mechanisms. The study underscores the effectiveness of Benford's Law in forensic accounting within the public sector and advocates for its integration into routine audits to bolster financial transparency and accountability.


Keywords


Benford Law, Compliance, Digital Forensics, Fraud, Public Finance

Full Text:

PDF

References


Abdul Aris, N., Othman, R., Bukhori, M. A. M., Arif, S. M. M., & Malek, M. A. A. (2017). Detecting accounting anomalies using Benford’s Law: Evidence from the Malaysian public sector. Management & Accounting Review, 16(2), 73. https://myjurnal.mohe.gov.my/public/article-view.php?id=115464

Antonio, G. R. (2023). Numbers don’t lie: decoding financial error and fraud through Benford’s Law. Journal of Entrepreneurship, 139–153. https://doi.org/10.56943/joe.v2i3.367

Assegaf, A. (2017). Curbing Corruption through tertiary education in Indonesia and Japan: analysis of legal system and Islamic Perspective. Analisa, 2(02), 254-273. https://doi.org/10.18784/analisa.v2i2.452

Association of Certified Fraud Examiners (ACFE). (2024). Report to the nations: 2024 global study on occupational fraud and abuse. https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf

Azevedo, C. da S., Gonçalves, R. F., Gava, V. L., & Spinola, M. de M. (2021). A Benford’s Law based methodology for fraud detection in social welfare programs: Bolsa Familia analysis. Physica A: Statistical Mechanics and Its Applications, 567. https://doi.org/10.1016/j.physa.2020.125626

Ben Hamida, A., de Peretti, C., & Belkacem, L. (2024). The link between abnormal numbers and price movements of financial securities: How does Benford’s law predict stock returns? International Review of Financial Analysis, 95. https://doi.org/10.1016/j.irfa.2024.103517

Benford, F. (1938). The Law of Anomalous Numbers. Proceedings of the American Philosophical Society, 78(4), 551–572. http://www.jstor.org/stable/984802

Bwarleling, T. H. (2020). Aplikasi Hukum Benford dalam Menganalisa Kasus Garuda Indonesia. Jurnal Akuntansi Bisnis, 13(2). https://doi.org/10.30813/jab.v13i2.2240

Cerqueti, R., & Provenzano, D. (2023). Benford’s Law for economic data reliability: The case of tourism flows in Sicily. Chaos, Solitons and Fractals, 173. https://doi.org/10.1016/j.chaos.2023.113635

Christian, N., & Basri, Y. (2019). Analysis of fraud triangle, fraud diamond and fraud pentagon theory to detecting corporate fraud in Indonesia. International Journal of Economics, Business and Management Research, 3(8), 1–13. https://ijebmr.com/link/420

Dang, C. T., & Owens, T. (2020). Does transparency come at the cost of charitable services? Evidence from investigating British charities. Journal of Economic Behavior and Organization, 172, 314–343. https://doi.org/10.1016/j.jebo.2020.02.020

Edoumiekumo, A. R., Nkak, P. E., Faleti, J. O., Abah-Marcus, O., & Tiemo, H. (2020). Internal Audit and Fund Misappropriation in the Public Sector of Nigeria. Research Journal of Finance and Accounting, 11(16). https://doi.org/10.7176/rjfa/11-16-08

G. Harb, E., Nasrallah, N., El Khoury, R., & Hussainey, K. (2023). Applying Benford's law to detect accounting data manipulation in the pre-and post-financial engineering periods. Journal of applied accounting research, 24(4), 745-768. https://doi.org/10.1108/JAAR-05-2022-0097

Gorenc, M. (2019). Benford’s law as a useful tool to determine fraud in financial statements. Management, 14(1), 19–31. https://doi.org/10.26493/1854-4231.14.19-31

Grammatikos, T., & Papanikolaou, N. (2016). Applying Benford’s law to detect fraudulent practices in the banking industry (Report). University of Sussex. https://hdl.handle.net/10779/uos.23437814.v1

Gueron, E., & Pellegrini, J. (2022). Application of Benford–Newcomb law with base change to electoral fraud detection. Physica A: Statistical Mechanics and Its Applications, 607. https://doi.org/10.1016/j.physa.2022.128208

Hamilton-Hart, N. (2001). Anti-corruption strategies in Indonesia. Bulletin of Indonesian Economic Studies, 37(1), 65–82. https://doi.org/10.1080/000749101300046519

Herteliu, C., Jianu, I., Dragan, I. M., Apostu, S., & Luchian, I. (2021). Testing Benford’s Laws (non)conformity within disclosed companies’ financial statements among hospitality industry in Romania. Physica A: Statistical Mechanics and Its Applications, 582. https://doi.org/10.1016/j.physa.2021.126221

Hilal, W., Gadsden, S. A., & Yawney, J. (2022). Financial fraud: A review of anomaly detection techniques and recent advances. Expert Systems with Applications, 193, 116429. https://doi.org/10.1016/j.eswa.2021.116429

Lacina, M., Lee, B. B., & Kim, D. W. (2018). Benford’s Law and the effects of the Korean financial reforms on cosmetic earnings management. Journal of International Accounting, Auditing and Taxation, 30, 2–17. https://doi.org/10.1016/j.intaccaudtax.2017.12.002

Majid, J., Awaluddin, M., & Asse, A. (2022). Public control of accountability: Efforts to prevent fraud sustainability budget government Indonesia. Relações Internacionais no Mundo Atual, 3(36), 732–747. https://revista.unicuritiba.edu.br/index.php/RIMA/article/view/6004

Mangala, D., Kumari, P., & Research Scholar, P. D. (2017). Red Flag: A Mean for Preventing and Detecting Corporate Fraud. https://doi.org/http://dx.doi.org/10.2139/ssrn.2988594

Margellou, A., & Pomonis, P. (2023). Pore properties, power laws and Benford’s Law. Journal of Solid State Chemistry, 320. https://doi.org/10.1016/j.jssc.2023.123866

Marquart, J. W., & Alan Thompson, R. (2024). Exploring relation fraud, murder,and the Fraud Triangle. Journal of Economic Criminology, 4, 100061. https://doi.org/10.1016/j.jeconc.2024.100061

Mebane, W. R. (2006). Election forensics: Vote counts and Benford’s Law. Summer Meeting of the Political Methodology Society. Papers, Posters, and Syllabi (No. 620).

Mebane, W. R. (2009). Note on the presidential election in Iran. Updated notes on the author’s website. Retrieved from http://www.benfordonline.net/fullreference/756

Mebane, W. R. (2010). Fraud in the 2009 presidential election in Iran? Chance, 23(1), 6–15.

Melita, M. D., & Miraglia, J. E. (2021). On the applicability of Benford law to exoplanetary and asteroid data. New Astronomy, 89. https://doi.org/10.1016/j.newast.2021.101654

Newcomb, S. (1881). Note on the Frequency of Use of the Different Digits in Natural Numbers. American Journal of Mathematics, 4(1), 39–40. https://doi.org/10.2307/2369148

Nugroho, H., Raharjo, A., & Pranoto. (2016). The optimization of corruption prevention towards indonesia corruption-free. Jurnal Dinamika Hukum, 15(3). https://doi.org/10.20884/1.jdh.2015.15.3.475

Rauch, B., Göttsche, M., Engel, S., & Brähler, G. (2011). Fact and fiction in EU-Governmental economic data. German Economic Review, 12(3), 243–255. https://doi.org/10.1111/j.1468-0475.2011.00542.x

Rodrigues da Cunha, F. C., & Bugarin, M. S. (2015). Benford’s law for audit of public works: An analysis of overpricing in Maracanã soccer arena’s renovation. Economics Bulletin, 35(2), 1168–1176. Retrieved from https://ideas.repec.org/a/ebl/ecbull/eb-14-00694.html

Szabo, J. K., Forti, L. R., & Callaghan, C. T. (2023). Large biodiversity datasets conform to Benford’s law: Implications for assessing sampling heterogeneity. Biological Conservation, 280. https://doi.org/10.1016/j.biocon.2023.109982

Transparency International. (2024). Corruption perceptions index 2024. Transparency International. https://www.transparency.org/en/publications/corruption-perceptions-index-2024




DOI: https://doi.org/10.17509/jrak.v13i3.91881

Refbacks

  • There are currently no refbacks.


Creative Commons License

Jurnal Riset Akuntansi dan Keuangan  is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats