COMPARATIVE ANALYSIS OF MILLING-BAKERY AND  CONFECTIONERY INDUSTRY IN SERBIA BASED ON BENFORD’S  LAW

Dragana Petrović; Milan  Novović; Milan  Šoškić

doi:10.59267/ekoPolj250113P

Authors

Dragana Petrović Faculty of Applied Management, Economics and Finance (MEF), Belgrade, Serbia
Milan Novović Higher Business School of Proffesional Studies, Belgrade, Serbia https://orcid.org/0000-0002-6944-7973
Milan Šoškić Higher Business School of Proffesional Studies, Belgrade, Serbia https://orcid.org/0000-0001-5018-2162

DOI:

https://doi.org/10.59267/ekoPolj250113P

Keywords:

Benford’s law, mill-bakery industry, confectionery industry, Statement of cash flows

Abstract

This study aims to apply Benford’s Law when detecting fraud and errors in financial statements. The research includes the practical use of this law on examples of large and medium-sized enterprises in the milling, baking and confectionery industry in Serbia. Based on the conducted data analysis and the obtained results, the authors ranked the companies, after which, through a comparative analysis between these two branches, they showed which data in the Cash Flow Report have greater deviations from Benford’s analysis. The obtained data are determined by means of a statistical investigation of the probability distribution of a random variable, where it should be borne in mind that data with lower figures are expected to be more numerous than data with higher figures. The results of the analysis tabularly and graphically present an overview of the movement of cash flows of companies in the milling, baking and confectionery industry.

Downloads

References

Amiram, D., Bozanic, Z., & Rouen, E. (2015). Financial Statement Errors: Evidence from the Distributional Propertiesof Financial Statement Numbers. Review of Accounting Studies, 20(4), 1540-1593. Retrieved from https://papers. ssrn.com/sol3/papers.cfm?abstract_id=2374093 (September, 10, 2023)

Basrak, B., & Varga, I. (2013). Benfordov zakon. Math.e, Hrvatski matematički elektronički časopis, 23(1), 1-6. [in English: Benford’s Law, Math.e, Croatian mathematical electronic magazine, 23(1), 1-6]. Retrieved from https://hrcak.srce. hr/file/175512 (September, 12, 2023)

Belopavlović, G. (2014). Uloga forenzičkog računovodstva u detekciji računovodstvenih prevara. Međunarodna naučna konferencija Univerziteta Singidunum Finiz – Finansijsko izveštavanje u funkciji korporativnog upravljanja, str. 128-130, [in English: Belopavlović, G. (2014). The role of forensic accounting in detecting accounting frauds. Singidunum University International Scientific Conference Finiz – Financial reporting Function of the corporate governance, pp. 128-130], DOI: 10.15308/finiz-2014-128-130

Benford, F. (1938). The law of anomalous numbers. Proceedings of the American Philosophical Society, 78(4), 551-572. Retrieved from https://www.jstor.org/ stable/984802 (September, 28, 2024)

Berger, A., & Hill, T. P. (2011). A basic theory of Benford’s Law. Probability Surveys, vol. 8, pp. 1-126, DOI: 10.1214/11-PS175

Cvetković, D., & Bošković, V. (2018). Pojavni oblici kreativnog računovodstva i najčešće manipulacije u finansijskim izveštajima. Oditor, 4(2), 78-89, [in English: Cvetković, D. & Bošković, V. (2018). Forms of creative accounting and most of manipulation in financial statements. Oditor, 4(2), 78-89]. Retrieved from https:// scindeks-clanci.ceon.rs/data/pdf/2217-401X/2018/2217-401X1802078C.pdf (Oktober, 10, 2023)

Cvetković, D. (2023). Benfordov zakon - alat i korektor u računovodstvu i reviziji. Revizor, 26(2) 135-147, [in English: Banford’s law – tool for accounting and auditing, Auditor, 26(2) 135-147], DOI: 10.56362/Rev23102135C

Deckert, J., Myagkov, M., & Ordeshook, C. P. (2011). Benford`s Law and the Detection of Election Fraud. Political Analysis, 19(3), 245-268, doi:10.1093/pan/mpr014

Diekmann, A., & Ben, J. (2010). Benford’s Law and Fraud Detection: Facts and Legends. German Economic Review, 11(3), 397-401. Retrieved from https:// www.researchgate.net/publication/297825048_Benford%27s_Law_and_Fraud_ Detection_Facts_and_Legends (September, 28, 2023)

Durtschi, C., Hillison, W., & Pacini, C. (2004). The Effective Use of Banford`s Law to Assist in Detecting Fraud in Accounting Data. Journal of Forensic Accounting, vol. 5, pp. 17-34, Edwards, Inc. Retrieved from http://lycofs01. lycoming.edu/~sprgene/M400/BenfordsLaw.pdf (September, 15, 2023)

Halilčević, E. (2019). Metode otkrivanja prevara u finansijskim izveštajima, Zbornik radova sa naučno stručne konferencije “FIRA 2019” - Finansijskoračunovodstvena i revizorska profesija u funkciji jačanja tržišne ekonomije, Sveučilište/Univerzitet “Vitez”, Travnik, BIH, 217-227, [in English: Halilčević, E. (2019). Methods of detecting of fraud in the financial statements, Proceedings of the scientific professional conference “FIRA 2019” - Financial accounting and auditing profession in the function of strengthening the market economy, University “Vitez”, Travnik, BIH, 217-227]. Retrieved from https://unvi.edu.ba/Files/Fira2019/ ZBORNIK%20RADOVA%20FIRA2019.pdf (September, 18, 2023)

Hoopwood, W., Leiner, J. J., & Young, R. G. (2014). Forenzičko računovodstvo. Univerzitet Singidunum, Beograd, Srbija, [in English: Hoopwood, W., Leiner, J. J., & Young, R. G. (2014). Forensic accounting. University Singidunum, Belgrade, Serbia]

Jukić, O., & Muhurdarević, N. (2003). Benfordov zakon, 3. Naučno-stručni skup sa međunarodnim učešćem - Kvalitet 2003, Zenica, BiH, 107-116, [in English: Jukić, O., & Muhurdarević, N. (2003). Benford’s Law, 3th Scientific expert conference with international participation - Quality 2003, Zenica, BiH, 107-116]. Retrieved from http://www.quality.unze.ba/zbornici/QUALITY%202003/016-R-059.pdf (September, 12, 2023)

Kaisher, M. (2019). Benford`s law as an indicator of survey realiability - can we trust our data?, Journal of Economic Surveys, 33(5), 1602-1618, doi: 10.1111/ joes.12338

Kossovsky, A. E. (2014). Benford’s Law: Theory, the General Law of Relative Quantities, and Forensic Fraud Detection Applications. World Scientific Publishing, Singapore.

Kruger, S. P., & Yadavalli, S. S. V. (2017). The Power of One: Benford’s Law. South African Journal of Industrial Engineering, 28(2), 1-13, DOI http://dx.doi. org/10.7166/28-2-1753

Lagarias, J., & Soundararajan, K. (2006). Benford`s law for the $3x+1$ function. Journal of the London Mathematical Society, 74(2), 289-303, doi.org/10.1112/ S0024610706023131

Miller, J. S. (2015). Benford`s Law: Theory and Applications. Princeton University Press, Princeton, New Jersey.

Miller, J. S., Berger, A., Hill, P. T. (2010). Theory and Applications of Benford’s Law, Princeton University, pp. 5-19.

Milojević, I., Andžić, R., & Vladisavljević, V. (2018). Accounting aspects of auditing the budget system. Economics of Agriculture, 65(1), 337-348, doi:10.5937/ ekoPolj1801337M

Milojević, M., & Terzić, I. (2013). Uticaj međunarodne regulative na finansijsko izveštavanje kompanija posmatrano sa aspekta stalne imovine, 14. Međunarodni naučni skup Sinergija, str. 176-183, [in English: Milojević, M., & Terzić, I. (2013). Impact of international regulatiory framework of financial reporting company taken from the aspect of fixed assets. 14th International Scientific Conference Synergy, pp. 176-183].

Milojević, M., Terzić, I., & Marjanović, V. (2014). Primena Benfordovog zakona u otkrivanju anomalija u finansijskim izveštajima - slučaj velikih preduzeća u Srbiji. Međunarodna naučna konferencija Sinteza, str. 564-570, [in English: Milojević, M., Terzić, I., & Marjanović, V. (2014). Application of Benford’s law in detecting anomalies in the financial statements – Case of Serbian large companies. International Scientific Conference Synthesis, pp. 564-570], DOI: 10.15308/ SINTEZA-2014-564-570

Mrvaljević, M., Kojić, N., & Mitić, N. (2022). Prevare i manipulacije u finansijskim izveštajima i mogućnosti za njihovu relativizaciju. Ekonomski signali: poslovni magazin, 17(1), 137-149, [in English: Mrvaljević, M., Kojić, N., & Mitić, N. (2022). Frauds and manipulation in financial statements and opportunities for their relativization. Economic signals: business magazine, 17(1), 137-149], DOI: 10.5937/ekonsig2201137M

Newcomb, S. (1881). Note on the Frequency of Use of the Different Digits in Natural Numbers. American Journal Mathematics, 4(1), 39-40. https://doi. org/10.2307/2369148. Retrieved from https://www.jstor.org/stable/2369148 (September, 20, 2024)

Nigrini, J. M. (2012). Benford’s Law: Applications for Forensic Accounting, Auditing, and Fraud Detection. John Wiley & Sons, New Jersey.

Petrović, D., Radosavac, A., & Mashovic, A. (2023). Implications of applying fair value accounting to modern financial reporting. Journal of Process Management and New Technologies, 11(1-2), 22-33, doi.org/10.5937/jpmnt11-44074

Rauch, B., Goettsche, M., Braehler, G., & Engel, S. (2011). Fact and Fiction in EU - Governmental Economic Data. German Economic Review, 12(3), 243-255, doi. org/10.1111/j.1468-0475.2011.00542.x

Singleton, T., Singleton, A., Bologna, J., & Lindquist, R. (2006). Fraud Auditing and Forensic Accounting. John Wiley & Sons, New Jersey.

Tödter, K-H. (2009). Benford’s Law as an Indicator of Fraud in Economics. German Economic Review, 10(8), 339-351, DOI: 10.1111/j.1468-0475.2009.00475.x

Walthoe, J. (1999). Looking out for number one, pp. 1-9. Retrieved from https:// plus.maths.org/issue9/features/benford/2pdf/index-gifd.html/op.pdf (September, 24, 2023)

Wang, L., & Ma, B.-Q. (2023). A concise proof of Benford`s law. Fundamental Research, pp. 1-4, doi.org/10.1016/j.fmre.2023.01.002

Watrin, C., Struffert, R., & Ullmann, R. (2008). Benford’s Law: An Instrument for Selecting Tax Audit Targets?, Review of Managerial Science, vol. 2, pp. 219-237, doi.org/10.1007/s11846-008-0019-9